The Monthly Gems by Allan Tong

The best way to play copper is Australia's BHP Group, the biggest copper operator in the world with half of its current earnings derived from the mineral. The company just reported. Profits of US$9.8 billion rose 9% over the past year while revenue gained 15% to US$58.8 billion. EBITDA was US$33 billion, while net debt was below US$9 billion.

Earlier this year, the TMX was a victim of both the SAASpocalypse and fears of the prediction market eating the TMX's lunch. Neither has happened nor will happen. The TMX will continue to enjoy high margins in data analytics and its proprietary software. Since bottoming in late June, X-T shares have rallied 20%. Problem is, shares have nearly returned to previous highs. A breakout is possible, but a more likely time to buy is during a pullback.

Carnival, Royal Caribbean and Norwegian are the biggest cruise lines in the world in that order, altogether taking 88% total market share. So, where does this leave Viking?With a 4.2% global share, but roughly 25% of the luxury market. In fact, Viking operates in a luxury niche in cruising, famous for its European river excursions. Ads show wealthy senior couples gazing at the Budapest skyline as their ship floats down the Danube. Last year, 102 ships generated $5.4 billion in revenue at a 95% occupancy rate, with nearly half of those passengers being repeat customers. These are mostly rich travellers 55 years and older who like Viking's bundled shore excursions, no-kids policy and no casinos. Customers aren't looking to party, but to chill and explore. As society grows older, this audience will grow, even though cruise lines are a competitive business.

WCP boils down whether you expect the US-Iran war will continue or end soon. Unfortunately, we expect it to drag on, given the pattern of ceasefire-fighting-ceasefire. The fact is Iran controls the Strait of Hormuz and the flow of crude oil. Trump can do little to change that except threaten. Even if the war completely stopped in August, sweeping the strait of mines could take six month and returning to normal shipping volumes could take 18 months or more. All this puts oil companies in the driver's seat as crude oil prices will not return to sub-$60, pre-war levels and likely will fall no lower than $70, as we saw a month ago.

Buy SPY on a 5-10% drawdown in the S&P, then trade or hold. By far, technology is SPY's largest component at 38.5% with Nvidia as the largest holding. Micron, Meta and Tesla are also big slices of the pie, but so are winners like Apple. SPY's MER is only nine basis points, but SPY pays only a 1% dividend.

This is another U.S. ETF that's benefiting from the current rotation out of AI. XLV has outperformed the S&P 12% vs. 3.6% in the past three months and has returned 26.8% in the past year. Healthcare is a safe, steady play at a 0.51 beta. XLV pays only a 1.6% dividend costs but costs only eight basis points.

This pharma company is a major holding within XLV, but worth owning itself. The company just reported Q2 earnings, with total net revenues beating, bolstered by 10.2% sales growth. To replace its blockbuster drug, Humira, AbbVie launched Skyrizi which boasts global sales of $5.5 billion, and Rinvoq (global sales of over $2.5 billion). AbbVie's overall sales growth was 10.2%.

This comeback story has ripped around 55% in the past 12 months compared to JP Morgan at 19% and Bank of America at 12%. It trades at a discount to book value and to peers, while its ROE is climbing. Last January, Citi reported 8% revenue growth, +35% EPS and +14% net interest income over the previous year. Growth is expected to continue. The private credit scare has hammered all U.S. banks in the last two months which opened a buying opportunity that endures, despite the recent recovery. Citi pays a robust 2.24% dividend yield. You don't need to wait for pullbacks to enter as the turnaround story continues.

When they reported their Q4 last week, same-store sales missed estimates and shares plunged nearly 8%. Are things that bad? Canadian same-store sales increased 1.5% and not the expected 2.8%, and fell 1.6% in traffic though rose 3.1% rise in basket size. Keep in mind that parts of Canada (i.e. Ontario) suffered an unusually cold January which impacted sales. Q4 sales rose 11.7%, including $234 million in sales from 402 Australian stores. EPS climbed 2.1% year-over-year, though gross margins of 45.5% paled next to 46.8% from the previous year.Meanwhile, DOL guides full-year same-stores sales at 3-4% compared to the just-reported 4.2%. A mixed bag, for sure. Further, the chain plans to open 60-70 new Canadian stores in the coming year, a $46.7 million warehouse in Calgary to support Western Canadian growth, open stores in Mexico, Peru, Colombia, El Salvador and Guatemala while converting an Australian chain to its own brand.

The street isn't impressed with this tech giant's AI offering, and shares have been punished 23.5% so far this year and lost all its gains in the past 12 months. Are we talking about Alphabet a year ago? No, it's Microsoft today. MSFT is also saddled by the SaaSpoclypse, now slowly fading. Investors are looking past the AI threat to see a company still strong in cloud with Azure's expanding revenues, up 31% in the past year and expected to rise another 40% this year. MSFT is also sitting on a mountain of cash, and continues to buyback shares and sell software subscriptions.

If you don't want to own the shiny rock itself, then consider LUG (not LUN-T). LUG is up 120% in the past year compared to the TSX's 27%. Thanks to robust free cash flows, Lundin Gold pays a safe 3.31% dividend. However, LUN currently trades at an historically high 30x PE, so the market is baking in strong performance going forward. The stock has cleanly beaten its last four quarters during which EPS rose from $0.64 in Q1 to $0.96 in Q4.

Stockchaser Michael O'Reilly has been pounding the table on this one for a while and he has a point. PSLV is the next best thing to owning actual silver. This fund holds actual silver held by the Royal Canadian Mint on behalf of the Canadian government. At least half of all silver is used for everything from solar panels, EV batteries and filters for HVACs. Because silver is the best conductor of electricity and heat, it is essential in computers and data centers. Demand for silver won't ease. Also,Sprott has a good reputation in funds and precious metals. However, PSLV is risky. It lives and dies by the price of silver, which has been a rollercoaster lately. This is too volatile for me, but could appeal to traders (not investors) who have the stomach to ride silver up and down. Bear in mind that PSLV charges a 0.57% MER.