Your portfolios in brief
This week, we chose Nvidia for our stock of the week, which we hold in our North American equity fund.
The company posted its earnings on Wednesday, announcing a 31% increase in sales. Despite a drop in revenue, of 17% to $5.93 billion in the third fiscal quarter, it still exceeded the average analyst estimate of $5.79 billion.
“We are quickly adapting to the macro environment, correcting inventory levels and paving the way for new products,” Jensen Huang, CEO of Nvidia, said in the release.
The company assured investors that demand for its artificial intelligence and data centre chips remains strong even as it continues to battle a downturn in the personal computer market. Nvidia has thus raised its forecast for the next quarter.
Despite the stock’s decline since the beginning of the year, Nvidia has long been a favourite of institutional investors thanks to its outstanding track record in recent years. In the last decade, excluding 2022, the stock has seen gains of 58% per year, offering larger profits than Apple Inc., Microsoft Corp. or Amazon.com Inc.
“In short, we are among those who believe that this year’s decline in technology stocks may be coming to an end. This week, the $5 billion investment by Berkshire Hathaway Inc. of Warren Buffett in Taiwan Semiconductor Manufacturing Co., manufacturers of chips for Nvidia, demonstrates that several investors are turning to these stocks which should regain momentum,” said our president and portfolio manager Philippe Pratte.
Market Brief
Markets started the week positively, encouraged by data confirming the slowdown in inflation. Indeed, the producer price index rose by 0.2% over one month in October, while analysts were anticipating 0.4%. This gave hope to investors that the Fed could slowdown its interest rate hikes as some of its targets appear to be achieved.
In Canada, the Consumer Price Index (CPI) rose 6.9% year-on-year in October, matching the rise recorded in September. Statistics Canada reported a slowdown in the rise in food prices but rising gasoline prices and the cost of mortgage interest contributed to inflation remaining unchanged.
Good earnings from Walmart and Home Depot also supported the indexes at the beginning of the week, while consumers are still present. During the last quarter, Walmart benefited from a large inventory which it managed to sell at low prices, allowing the company to record a good quarter.
The indexes had a good earning season even if the results were less solid. Investor expectations were down, and the worst had already been priced into the market. However, several companies surprised investors by reporting better than expected results, such as Apple and Netflix, offering a wind of optimism after they had been very cautious in the last weeks. Indeed, these surprised earnings have allowed the S&P 500 to post gains of 11% since mid-October.
“The situation seems to be improving with inflation which may have levelled off. The odds of rising interest rates as well as falling interest rates on government bonds have started to diminish. If the context holds and we reach the peak of the rate hikes, the chances of a successful "soft landing" of the economy that the Fed is trying to slow down without pushing it into recession, remains possible,” believe our president and Portfolio Manager Philippe Pratte.
“The retail sector earnings from this week as well as the latest economic data show that consumers remain healthy despite the tightening of financial conditions created by the Fed,” adds Philippe Pratte.
Here is the average for the week of the three main indexes at 1 p.m. Friday.
And here's the average for the week for the TSX in Canada.
Pratte Portfolio Management is a firm registered with the Autorité des marchés financiers (AMF) and the Ontario Securities Commission (OSC).
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