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It's time for the USD to rally. Currently, it is very undervalued while gold has been rallying and the economy has been declining. The disparity between USD and gold is historically extreme. Also, look at the chart for commercial hedgers: the last time they went extremely long was in early 2021, which led to a sharp USD rally in 2022. Hedgers are extreme now, which suggests a USD rebound ahead. Thirdly, sentiment by analysts and newsletter writers is very bearish. Also, Williams' cycle forecast indicates a dominant cycle tends to last 32-35 weeks, and it's time for the USD to roar from now into September.
QBTS is one of the more popular quantum computing stocks, and thus its fortunes are, for now, going to be driven by sentiment more than fundamentals. We would consider it very very risky. Short interest is 17% and yesterday a short seller made disparaging comments on it. It has about $100M cash but is losing money, and cash flow was negative $43M in the last 12 months. It is going to need more capital, likely this year. It is expected to keep losing money for some time. There is a big debate on quantum, as to whether it will be commercial in five years, ten years, or never. While interesting, there is not a lot to analyse yet here. With a market cap of $2B, 12-month revenue is only $9M. Frankly, we would consider it far too risky for the type of market backdrop we have right now.
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TGH now has a market cap of $189M, with the stock up 25% YTD. P/E is 15X. EPS was 2.4c, beating estimates of 2.0c. Revenue of $38.1M beat estimates of $35M. EBITDA of $5.59M beat estimates by 27%. Profit did decline year over year as there was a one-time item the prior year. Revenue rose 14.1%. 89 trucks vs sold vs 71. The outlook commentary was positive, with new production and new product lines expected to increase revenue. Things look good here. The balance sheet remains strong. Insiders remain committed with 30% of the stock.
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Estimates are 9.7c EPS and $651.8M revenue. The company has missed five of the past eight quarters. The stock is up 16% this year, as investors have shifted to safety and dividends. Valuation is still on the high side at 18X earnings. We would not miss it much if sold. We do not like making buy/sell decisions on one quarter, and would be fine exiting now. Getting a stock with 50% upside will add risks, and trying to 'replace' losses is not always advisable. We would prefer ENB in the utility-like sector, but for high growth we would look to CLS or SHOP or VHI, but only if one is comfortable with added volatility.
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Increased withholding taxes
There is a new bill proposed in the U.S. government that would increase withholding taxes on U.S. investments to Canadian investors. If passed, the proposed legislation would add five percentage points to the withholding tax rate each year for four years on certain types of U.S. income to Canadians. The bill appears to be in response to Canada’s digital services tax imposed on large U.S. technology companies last year. While the bill does not have a great chance of being passed (we hope), just the fact that the U.S. is contemplating such moves at a time when capital is already fleeing the country is quite ridiculous. Valuations in other markets remain cheaper than in the U.S., and if taxes to international investors increase there is even more incentive for investors to move money out of the country. Countries are supposed to attract capital for growth, not push it away. This is Economics 101.
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It keeps losing money. Look elsewhere.