There’s no bigger story these days than the earnings reports south of the border (where they keep most of the best companies on the planet) and in Canada. We can’t paint the earnings picture with one brush as many sectors are performing well, while others struggle. It is a tale of two economies as the consumer is revenge spending on services and experiences, while goods are in a ‘recession’. And of course the monster U.S. tech companies (mostly) continue to grow revenues and earnings. Though most of them are certainly expensive – see the Tweet/X below. The earnings roll in on the Sunday Reads.
Here’s that Tweet …
We hold Apple and Microsoft (and some other good growth stocks) as was reported when I shared the market-beating returns for our U.S. stock portfolio. In that post I also offer up 26 U.S. stocks for consideration (not advice) for 2023, given the valuation issues south of the border.
I also ran a chart to include July performance.
Earnings summaries
Berkshire Hathaway reported very strong earnings with a surprising lift from the insurance division. Berkshire is the largest position in my wife’s spousal RRSP, and largest stock holding, overall.
There’s almost $150 billion in cash sitting in good hands, should that well-advertised recession ever show up. Over the last 10 years Berkshire has delivered (very good) market-matching returns for us. Recently the stock has started to outperform.
I think it is a wonderful stock to own, especially for retirees and near retirees.
Here’s a good earnings wrap at MoneySense thanks to Kyle Prevost. You’ll find some coverage on U.S. tech and Airbnb, plus a look at some Canadian REITs that are hanging in there in a rising rate environment. Riocan’s (REI-UN/TSX) portfolio of grocers, pharmacies, dollar stores, and liquor stores was in very stable condition. Yes, you can look to the defensive sectors, even when selecting a REIT.
Kyle also covered the U.S. debt downgrade. That brought down markets even though 82% of U.S. companies have beat earnings estimates. Also factor in that for S&P 500 companies earnings have declined by about 5% year over year.
U. S. stocks were down 2.3% for the week, while Canadian stocks were down 1.65%.
Canadian telcos and pipelines
I’ll have to admit that my core Canadian stocks have been taking it on the chin in recent months, though my Canadian oil and gas stocks are enjoying a nice run.
One of my favourites where I’ve been banging the table for quite some time, Tourmaline (TOU/TSX) offered another special dividend and has a 12% trailing one year yield.
Telus reported weaker earnings, and plans to lay off 6000 employees. Telus saw some nice subscriber growth, but it is becoming a more challening environment. From that post …
It’s a tougher regulatory and competitive environment,” CIBC Capital Markets analyst Stephanie Price said in a phone interview, noting increased competition from Quebecor Inc. after its acquisition of Freedom Mobile is pressuring large wireless carriers.
The cost-cutting measures are well-timed given expectations for less profitable wireless prices, Scotia Capital analyst Maher Yaghi said in a note to clients
Telus is now trading at Summer of 2020 prices.
Bell (BCE/TSX) saw a 40% drop in net earnings while also delivering some very good subscriber growth and favourable trends in a few areas.
I think there is very good value to be found in the Canadian telco space. This is not advice, but an idea for consideration. Ditto for the banks and pipelines and utilities.
A month ago I reported that Canadian stocks were dirt cheap.
The crazy-good dividend yields certainly support that notion.
Canadian banks will being reporting earnings next week. There are some headwinds and negative sentiment in the space. That often points to long term value. The big Canadian banks are trading below their historical average PE ratio. And of course the risks are real given the debt loads of Canadians. That’s why the banks are cheap.
You’ll find a heavy weighting to financials in Vanguard’s VDY and iShares XEI. My wife holds VDY and I’m happy to keep chipping away.
While Canada is slipping, that won’t stop me from investing. It’s just one part of the portfolio and diversification is key.
More Sunday Reads
At My Own Advisor – what will you need to save to spend $75,000 a year in retirement? Via the Globe & Mail and Frederick Vettesse you’ll find this chart in the post …
One glaring observation is the benefit of delaying CPP and OAS. As you likely know, CPP payments will increase 42% when you wait until age 71 compared to 65 (to begin taking payments). There are also increases in payments if you delay OAS.
The strategy would include spending more aggressively from RRSP/RRIF and other accounts as you wait for the government payments. It’s usually a great trade off if you have the portfolio assets that will enable this cash flow plan.
Many self-directed investors (and Cut The Crap Investing readers) look to Cashflows & Portfolios to discover that optimal order and rate of account type harvesting to create retirement income.
On the subject of retirement Jonathan Chevreau offers his 5 picks for classic books on financial independence and retirement.
At Tawcan Bob offers his 2023 goals and resolutions update.
With earnings in full flight there’s no better time to check in with Dividend Hawk. Like Hawk, this past week I enjoyed some dividends from CVS, TC Energy and TD Bank. You’ll find a few dozen earnings summaries and links in the Hawk report.
There’s another robust week in review at Banker on Wheels. It’s a nice mix of reads and podcasts and videos.
You’ll find a portfolio update on Million Dollar Journey.
That’s quite the run over the last several years. Yes dividend investing can be addicting. Though you certainly need an aggressive savings rate as well.
And there’s likely much more retirement income available for Mr. MDJ, by way of share sales. Remember you gotta sell some shares to not sell yourself short. Dividends plus share sales (homemade dividends) is the most optimal strategy. And we do need to manage the sequence of returns risk with cash and bonds. I like the idea of managing inflation risks as well in retirement.
Canadian stocks for 2023
At stocktrades.ca Dan offers 11 Canadians stocks fo 2023. That’s a good list, and offers a few ideas outside of the ‘traditional’ Canadian stock portfolio. Dan is still a fan of Shopify that recently offered a solid quarter.
I know this may sound crazy as Shopify is off to a meteoric 2023, gaining more than 85% at the time of writing. However, it’s still a long ways away from its 2022 highs because of a tech valuation reset.
And we’ll give the final word to Ian McGugan at the Globe & Mail who posted on how to live with stock market uncertainty.
“Your primary goal as an investor isn’t to ingeniously predict the future, it’s to avoid obvious mistakes in the here and now.”
Ian on market valuations …
It helps to be a bit stingy, too. As a general rule, it makes more sense to invest in stocks when they’re cheap rather than when they’re expensive.
Stocks have historically traded for about 16 times their annual earnings. Right now, Canadian stocks are fetching about 14 times their expected 2023 earnings. U.S. stocks are going for almost 22 times earnings.
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Have a great Sunday and a wonderful week.
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I’m retired having extended OAS to age 70 at a 36% premium. Didn’t need it at 65 and taxes have been ultra low as my primary income comes from dividends and the unused DTC offsets income from other sources … at least in BC this is true. Each province is different. The unintended benefit of deferral for a truncated payout due to high income is this – you can earn a higher amount until the full OAS is clawed back @ 15% on every dollar over $86,000 (this tax year). In my case – and again unintended – the timing couldn’t have been more perfect as I had a huge increase in interest this year from cash savings, so although reduced OAS is money recycled back to Ottawa (after claw back and taxes) I’ll still be left with something up to around $160,000 ( or more).
Good for you. That must be one hell of a cash balance.