Ticker Take: a weekly newsletter on investing.

A recap of the week.

What’s next for big tech?

Technology stocks have been roughed up recently, with the NASDAQ 100 down 8% in the past two weeks.  While it’d be a stretch to suggest investors are running scared, they definitely hit the pause button after a huge run-up.

Whether we see an official correction may depend on how things play out with earnings this week — Microsoft, Meta, Apple and Amazon are all set to report.

Looking at the reaction to earnings so far, investors seem to have shifted from being endlessly optimistic to increasingly impatient.  Alphabet shares struggled after investors worried the company might be spending too much on the AI evolution.  And in the case of Tesla, worries with the state of the EV market quickly cooled off a stock that had been benefiting from excitement around its AI-filled future.

It’s possible, though, that the malaise we’ve seen for tech stocks of late has created an easy hurdle for the other companies that are set to report results.

For what it’s worth, many of the pros I speak with still have strong conviction views on lots of tech stocks.  John O’Connell of Davis Rea made the case for Amazon this week, while JoAnne Feeney told me she is still a big long-term believer in stocks like Broadcom.  Her full list of picks is at the bottom of the newsletter.

Tech, bank stocks typically do well during election cycles

Financials and tech have attracted a fair amount of investor money this year.  As it turns out, that is quite common during Election cycles.

Alec Young, Chief Investment Strategist at MapSignals found that with the S&P 500 historically, financials tend to enjoy a total return of 11.7% in an election year and further gain 23% in the year following the election.  That averages out to a 17.3% gain during the election cycle.

Tech, meanwhile, averages 7.9% and 23.6% total returns in those same stretches, averaging an election cycle gain of 15.85%.

Trump’s Bitcoin pledge

Former President Donald Trump made headlines over the weekend, pledging not to sell any more of the U.S. government’s Bitcoin holdings and to set up a strategic reserve if elected President. Trump appeared at the Bitcoin 2024 conference in Nashville to share a crypto friendly message that differed from what we heard from him during his time in the White House.  That said, the general tone around Bitcoin has changed and the successful launch of spot Bitcoin ETFs is a good example of that.

What does the election mean for cannabis stocks?

This is a group that had enjoyed some nice momentum, based on steps taken by the Biden administration to reclassify marijuana. Bruce Campbell, President of StoneCastle Investment Management, believes that a Democrat victory in November would be a great support for the sector.  As for Trump, Campbell believes he would bring more uncertainty.  His advice to investors is to stick with the largest American players — Curaleaf, Trulieve or Green Thumb — which have businesses that are growing regardless of the short term political noise.

Will the election help high tax rate stocks?

On the road to the election, here’s been a lot of talk about a Republican win benefiting business because of Tump’s position on corporate taxes. It is certainly one of the key differentiators when it comes to policy.  But when it comes to the companies who could benefit, keep in mind that tax rates vary depending on the industry. So the folks at Bloomberg Intelligence did a break down to see which companies (on average) fall into the high tax bracket — and which are seen as having lower tax rates. 

When it comes to so-called high tax rate stocks - these are companies within the S&P 500 that make up the top 10 percent of S&P names with higher tax rates – there is a pretty consistent theme. Health care stocks make up the biggest portion of this group, followed by consumer staples stocks and energy names.  There are high tax rate stocks from a bunch of sectors, but those three groups are the most dominant.

By comparison, when you look at so-called low tax rate stocks - the bottom 10 percent of companies, when it comes to having the lowest tax rates  -- real estate names would be the most dominant in this group, followed by technology.  Again, there are some names from a bunch of sectors that would classify as low tax rate stocks, but real estate and technology are the highest positions.

Now, it’s worth pointing out that if you believe there is a Trump trade to be had tied to taxes, it does not seem to have taken shape as of yet.  In the past year, high tax stocks have underperformed low tax stocks by a fairly wide margin. And this has actually continued to be the case so far in July. So if Trump does take the White House with a strong pledge towards keeping corporate taxes low, we’ll see if that influences some of those specific sectors to a greater degree.

What happened to copper?

Copper has cooled down dramatically, declining roughly 20% from its recent highs. Reid l’Anson, Senior Commodity Economist at Kpler says China’s woes are partly to blame. In his opinion, rapid expansion across renewables manufacturing in China is not enough to offset the ongoing contracting in the country’s property market.  l’Anson expects copper will continue to struggle until there are signs that the property market is flatlining.

In addition, he thinks the initial surge in copper prices this year between February and May was overdone and not supported by the current demand picture.

All that said, he’s still bullish on copper over the long-term, amid the so-called green transition. Stocks of companies in the sector he suggests keeping an eye on include Ivanhoe Mines.

Ways to play the Space economy?

It’s still early days for investing in this area, but we spoke this week with Chad Anderson, a venture investor who backs companies tied to the Space economy.  

In his opinion, SpaceX has done more than any other company to build out the ecosystem, however it remains a private company.

One publicly traded company he finds impressive is the Earth imaging company Planet Labs, which is using Nvidia tech to boost satellite AI.

The company has experienced growing pains.  It recently announced layoffs as it navigates a cash crunch.

Wall Street, though, remains bullish on Planet Labs, with 80% of the analysts recommending the stock. Former YouTube CEO Susan Wojcicki also just joined the board of directors.

Stocks with high shareholder yields

Investors are constantly searching for shareholder friendly companies.  Certainly, growing revenue and profit can bring investor smiles.  But, there are more specific levers companies can pull to excite shareholders.  Sometimes, that’s buying back stock.  Sometimes, that’s paying dividends.  And, for companies that are navigating debt loads, committing to balance sheet improvement and reducing debt is also appreciated.  And so, we wanted to look at companies that score well for their commitment on all three of those metrics.  There is one — called shareholder yield — which measures them together.  We took a fairly large group of North American businesses, who earned top marks on shareholder yield and then, we narrowed our list to include just stocks that are recommended by a majority of analysts.  Against that backdrop, here’s our list…

Keycorp 

MGM Resorts

Carnival

Bank of New York Mellon

Valero Energy 

United 

Delta

Tapestry

American Tower

Chevron 

Devon

GM

Las Vegas Sands

Comcast  

Marathon Petroleum

Ameriprise

DuPont

Autozone

Mondelez

Emerson Electic

Odds of losing money in the stock market?

We talk a lot about how much money you can make in the market.  But as an investor, it’s important to protect your capital.  And on that front, there is much value in the old adage, “it’s not about timing the market, but about time in the market.”

For example, if you invested in the S&P 500 over one day, your odds of losing money would be extremely high — give or take, around 46%.  But if you’re invested in that same index over a decade, the odds of losing money decline to 6%. 

Good luck out there!

Picks of the week

Brian Belski, BMO Capital Markets: CP Kansas City, Enbridge, Citigroup, Netflix 

James Telfser, Ewing Morris Investment Partners: First Capital Realty, K-Bro Linen

Dan Rohinton, iA Global Asset Management: Linde, Mastercard, TRYG

Jordan Zinberg, Bedford Park Capital: Payfare, Ag Growth, Foraco 

Andrew Pink, LDIC: Capital Power, StorageVault Canada, Tourmaline Oil

Kim Bolton, Black Swan Dexteritas: Oshkosh, L3Harris Technologies, SentinelOne

David Burrows, Barometer Capital: Owens Corning, Crane, BWX Technologies, Stantec, SDVY (ETF)

JoAnne Feeney, Advisors Capital Management: Seagate Technology, Texas Instruments, Palo Alto Networks, Broadcom, Advanced Micro Devices, Qualcomm, Polaris, Lennar, TJX Companies