David Driscoll

Yes. The bond market always dictates what happens in the stock market. If you're thinking about how to value a stock, the higher interest rates go, the higher the discount rate. This, in turn, means lower cashflows. You're seeing it today where the S&P is down 1%, but the Mag 7 stocks are down anywhere from 2-4%.

So it's important for investors to understand that rates are rising -- 30-year mortgage rates in the US are now 7%, 30-year bonds are at 4.8% and going higher. Professional bond investors are only investing in 2-3 year bonds, and not longer, simply because they're afraid of higher inflation if this economy overheats. Instead of cutting rates, the Fed may end up having to raise rates.

In 2022, rates went up 4.75%. The S&P was down 20%, NASDAQ fell 35%, and the Mag 7 were down anywhere from 25-70%. This is important information for people who are in tech stocks right now, where it's all about AI. His son-in-law owns a ton of NVDA shares; David advised him that when he'd doubled his money, to sell half and use the proceeds to pay down his mortgage. You have to be smart about how you interact in this market.

Last week, a prospective client came in and wanted a 35% guaranteed return with no risk. Risk-free T-bills are at 3%. The client needs to understand what kind of risk he's taking to get that return. If rates go up, stocks will come down, and this client's portfolio will get hammered. That's not how his firm works.

He can't really predict anything until we see what happens on January 20 when the circus comes to Washington. Trump wants to cut corporate taxes, which would be good for profitability. But how is he going to rein in runaway deficits and potential higher inflation?

Recent earnings were up 4%. Veritable cash cow because they bank all the payroll taxes (that customers submit to the IRS) at current interest rates. It's like free money on top of earnings. Revenue growth was double GDP. Entirely domestic, so protected from trade barriers. 

Services small companies, so if the economy does well from tax cuts, this name should continue to grow. Long-term, compounding annual returns of 14-15% -- you double your money roughly every 4-5 years. A buy and hold, not a trade.

2/3 of all of your performance comes from dividend growth and reinvestment of those dividends.

Financial flexibility lets a company increase dividend, pay down debt, invest in R&D, and make tuck-in acquisitions (which grow your revenues and profits over time). Rinse and repeat, and you get double-digit returns in the long run.

If you double your money, do the smart thing and sell half. Certain tech stocks are 3x riskier than the market if interest rates go up. It's about managing risk in your portfolio. It's not watching it go up 100%, and thinking maybe it'll go up another 500%. Then you could buy a house without taking out a mortgage. Take your emotions out of the game and be realistic. At the end of the day, it's revenue growth and profit growth that determine where the stock price will go.

Still adding new money. He uses a name like this to offset higher beta/risk names like CSU and BN in client TFSAs. Due to price competition, telcos haven't grown. Being further tested due to less immigration. Flipside is that the 6-7% yield and a 2-3% price gain would give you a 10% total return.

Problem is all the leverage taken on to build out 5G, but not getting an economic return from it.

Still adding new money. He uses a name like this to offset higher beta/risk names like CSU and BN in client TFSAs. Due to price competition, telcos haven't grown. Being further tested due to less immigration. Flipside is that a 6-7% yield and a 2-3% price gain would give you a 10% total return.

Problem is all the leverage taken on to build out 5G, but not getting an economic return from it. Because CCA could hop on the fibre network paid for by others, its stock price has gone up, while the others have gone down.

If its quantum computing chip ever comes to fruition in the next 5-10 years, then this is a stock you want to own. He owns MSFT, and it's also involved in quantum computing. Other names to think about are AMZN, IBM, Atos out of Europe, and Toshiba from Japan.

If you double your money, do the smart thing and sell half. These tech stocks are 3x riskier than the market if interest rates go up. It's about managing risk in your portfolio. 

He owns MSFT, and it's also involved in quantum computing. Other names to think about are GOOG, AMZN, IBM, Atos out of Europe, and Toshiba from Japan.

If you double your money, do the smart thing and sell half. These tech stocks are 3x riskier than the market if interest rates go up. It's about managing risk in your portfolio. 

He owns MSFT, and it's also involved in quantum computing. Other names to think about are GOOG, AMZN, and Toshiba from Japan.

If you double your money, do the smart thing and sell half. These tech stocks are 3x riskier than the market if interest rates go up. It's about managing risk in your portfolio. 

He owns MSFT, and it's also involved in quantum computing. Other names to think about are GOOG, AMZN, and Toshiba from Japan.

If you double your money, do the smart thing and sell half. These tech stocks are 3x riskier than the market if interest rates go up. It's about managing risk in your portfolio. 

Water irrigation equipment. Commodity prices are low, so farmers aren't buying systems. Satellite technology makes targeted irrigation cheaper. Road infrastructure business fairly stable. Capped costs. Earnings margins have gone up, so cashflow can be allocated to a higher dividend, R&D, and tuck-in acquisitions.

Serial acquirers tend to do better than the indices over a 10-20 year time horizon, and that's his focus.

Plumbers of the internet for things like toasters, fridges, washing machines. Lagging the tech sector and AI. Turning profits into free cashflow, and very few companies can do that at 100%. Not as risky a play as AI. A utility-type of tech play in your portfolio. Has gone sideways, but profit growth will drive price higher over time.

Financial flexibility lets them increase dividend (up ~15%), pay down debt, invest in R&D (either #1 or #2 in this regard), and make tuck-in acquisitions (grows revenues and profits over time). Rinse and repeat, and you get double-digit returns in the long run.

Big moves in the 2-year bond rate means that's where the Federal Reserve will have an impact. Professional investors are not investing in longer-dated bonds of 10 years or beyond. That gives the signal of a rising yield curve, which will be good for the economy. It's inflation that's the biggest concern.

So it you're parking your money for 1-3 months, US T-bills are paying 4.25%. That's the place to put it. Don't go beyond 2 years, as everything's been backing up. Yields of 2 years and greater have gone up, not down, despite the fact that the Fed's cutting rates.

One way to judge management is to think about capital costs versus their return on invested capital. How are they allocating capital and making over and above that, because that translates into free cashflow. FCF in 2021 was $700M; at the end of January 2024, it was $1.2B. So FCF has gone up 60%, a very good sign. Allows them to open new stores, with each new store adding revenue.

He looks for ROICs of 15% or greater. In terms of ROIC, they're making 20% on their money with cost of capital at 8.5%. That's a difference of 12%, and a whole lot of free cashflow. Lets them be flexible, continue with their growth plan, and stock price is performing as it should be.

All the energy that's about to be consumed through electrification needs fuses. Smartphones have not been growing, but if Apple's iPhone with AI has traction, should see a pickup. A lot of automakers are struggling, and that's 2/3 of its business.

Still generates free cashflow and turns profits into 100% free cashflow. Financial flexibility to get them through these slower times. If stock price falls so that the portfolio position falls to 2%, he buys more to bring it up to a 3% weighting.