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It's really about concentration. Yes, more stocks are down than up. On the NYSE, more stocks are hitting 52-week lows than 52-week highs, despite the S&P 500 hitting all-time highs. Part of the buoyancy is that the major economic threats of surging inflation and rapidly rising interest rates are behind us.
There still remain challenges. Economy is slowing down, consumers are being squeezed, savings rates are falling to historically low levels, credit card debts are at record highs. We've talked about how the top 10% own about 7% of the wealth, whereas the bottom 50% own only 2% of the wealth. The wealth gap, or the disparity between the haves and the have nots, is starting to cross over into the corporate sector.
If you look at the top 10 companies in the S&P 500, or 2%, they generate about 1/3 of all the profits. The top 10 companies have more cash on their balance sheets than the bottom 400 combined. Families and companies at the top are doing quite well, but everyone else is struggling.
That's a potential risk for the market because employment is dispersed broadly across the economy, it's not concentrated the way earnings or net worth or cash are. Employment is what triggers whether or not there's going to be a recession. So when you have so many people working for companies that are just getting by or struggling, there's a risk there.
There is opportunity. The S&P 500 is trading around 21x earnings, but that earnings multiple is skewed because of all the tech stocks in the index. Decades ago, there used to be this index called the NASDAQ off in the corner, and that's where the risky and volatile tech stocks existed.
But those companies have gotten so large, they now dominate the S&P 500, and so the S&P is actually a riskier index today than before. Comparisons with the 2000 tech bubble aren't fair because, back then, 14% of the index was represented by companies with no revenues. Today it's only around 4%.
But tech stocks are still inherently more volatile. While the companies aren't as risky on an operating basis, they do trade at higher valuations, so there's valuation risk.
Favours Telus for the long run. More consistent performer for dividend growth. Share price over 10 years has been steadier. (He's based in Western Canada, so he may have a bit of a home-team bias ;)
But if he had to buy one today, he'd go with BCE. Trading at a 10-year low, appears oversold. Yield is about 8.5%, and looks secure -- reducing capex, and it could introduce a DRIP program (which would give it a healthier payout ratio).
Favours Telus for the long run. More consistent performer for dividend growth. Share price over 10 years has been steadier. (He's based in Western Canada, so he may have a bit of a home-team bias ;)
But if he had to buy one today, he'd go with BCE. Trading at a 10-year low, appears oversold. Yield is about 8.5%, and looks secure -- reducing capex, and it could introduce a discount to its DRIP program (which would give it a healthier payout ratio).
Big tumble recently. Priced for perfection at 100x earnings, so everything better go well. Forecast for growth was light, from low 20s to 18%, enough to knock it down dramatically. Still expensive at 12x revenue.
Many other companies growing in high teens that you can buy for much more attractive valuations.
Lots of AI hype, started announcing features to boost sales. Last quarter's results were the fifth out of six that revenues fell. Growth problem. Topline hasn't grown for over 1.5 years. People are holding onto phones longer.
Sells to consumers, whereas MSFT sells to corporations. Consumers have limited needs versus a corporation. So AAPL has to find something else to move the needle.
S&P 500 is being pushed up by a handful of large companies. TSX is the other way around, where small resource companies are doing better than the large caps. Weakness in the prices of copper and oil. Nat gas in Canada is terribly low. Resource stocks are pretty volatile.
With the smaller resource companies lifting the TSX, and now selling off, that's enough to bring down the overall market in Canada.
Correct. About 40% of gross profits comes from fuel. Putting a big push on its merchandise. Was trading below its historical average (17.5 PE) a few years ago, took off, and then became a momentum stock. Trading around 27x PE, overpriced. Hybrids, not EVs, are the threat.
Still, seems to be doing all right in European countries where there are lots of EVs.
Take the bigger picture view. TD makes $14B in profit a year. So whether the fine is $2B or $4B, it's in a position to get through this. Remember that over the last 100 years, you never went wrong buying a Big 5 Canadian bank stock that was beaten down because of trouble. They always come back with a 100% success rate. Pays you a 5.5% yield while you wait.
Even the CEO mentioned it could get worse before it gets better. Don't buy a full position now, but you could start one.
Trades around 12.5x PE, yield's just over 7%, insider buying across the board to the tune of close to $8M last year. Nat gas demand has increased over the last 6 years at about a 4% clip, expected to continue. Dividend should be able to increase 3-5% per year.
