A Comment -- General Comments From an Expert (A Commentary)

Basic Investing Metrics: Debt and Leverage. These metrics can have a significant impact on a company’s financial health. Investors should examine a company’s debt levels to determine if they are sustainable and manageable. Areas to pay attention to include the debt-to-equity ratio, which measures a company’s debt relative to its equity. A company with a high debt-to-equity ratio may be more vulnerable to economic downturns and may struggle to make debt payments.

The interest coverage ratio, which measures a company’s ability to pay interest on its debt, is another key. A company with a low-interest coverage ratio may struggle to meet its debt obligations.

Also look at the maturity of a company’s debt, or the time frame in which it must be repaid. A company with a large amount of debt maturing in the near term may face liquidity issues. We always look at the debt-maturity schedule, which is typically revealed in the financial notes.
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Believes low unemployment rate in the USA (~3.4%) adding fuel to inflation.
Low unemployment rate correlated with under performing stock market.
Unemployment not a good indicator on state of economy.
Thinks economy and stock market in for a tough quarter. 

Basic Investing Metrics: Quality of Earnings. This refers to the sustainability and reliability of a company’s profits. Investors should examine a company’s earnings to determine if they are of high quality. A company with consistent earnings growth over several years is more likely to have high-quality earnings than a company with erratic earnings. And a company with positive cash flow from operations is more likely to have high-quality earnings than a company with negative cash flow.

Also, a company with a high return on equity is more likely to have high-quality earnings than a company with a low return on equity. And investors should remember that many companies do not pay much in taxes when they are growing, so it is important to know how earnings will change once a company becomes cash taxable. 
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He feels constructively optimistic about equity markets going forward. Inflation has been dropping for 9 consecutive months and will possibly continue into next year. Interest rates will stabilize and central banks will become much more dovish.

Historically when the Fed tightening cycle ends, 12 months later the S&P 500 is up an average of 14.3% with a win ratio of 80%. Despite volatility, markets are up since the October lows. We've had two 7%+ quarters. Those are signs of an uptrend.

Likes the cyclical areas. Opportunities in financials, especially given what's happened in the last couple of months. 

Despite oil being down, there are major constraints in supply, and demand remains steady. OPEC+ has reduced capacity and supply. Strategic petroleum reserve is down about 37% over the past couple of years. China's withdrawal from its zero-Covid policy is going to help names in the energy sector. 

Consumer discretionary is his third most preferred area. Inflation dropping, China back on board after almost 3 years of lockdown.

Buying high-quality Canadian companies at attractive valuations has historically done very well in inflationary environments like those we're experiencing now. For much of the past decade, growth stocks have done quite well. But growth stocks are longer-duration assets, so much of their value is based on expectation of future growth. When interest rates increase, valuation tends to drop by applying a discount rate. 

SHOP is an excellent example of this. Down 70% since November 2021. Despite that, the Canadian market has performed relatively well. In 2022, Canada had a strong return for developed markets. YTD, it's up about 5-6%, so it's starting out pretty well.

Looking at a chart of PE multiples for the last 20 years, right now there's a significant difference between the two in terms of multiples. The S&P is trading at 19x earnings, while the TSX is at 13x. That's about a 50% difference, and means that the Canadian market offers much better value right now relative to the US market. Other multiples such as price to book show the same thing. Dividend yield for the TSX is 3.2%, whereas in the US it's a paltry 1.7%.

Warren Buffett likes to say, "Be fearful when others are greedy, and be greedy when others are fearful." Now is the time to be a little bit greedy for Canadian equities.

Impressive profitability. High ROE and ROIC. Strong balance sheet. 

Barometer of profitability of the Canadian market is 12%, US is 14%. That's the average, and he wants companies that are better than average.

Energy is down 7% this week. It's a classic case of a sector going too way too far and must be belanced out.

She gets it: if we go into a hard landing and recession, there will be pain in oil prices. She sticks by oil this year, though, by adding to your position, or sell calls and collect the dividend. A lot of this current weakness is overblown. Over 18 months, the price of oil will be fine.

Basics Company Metrics Investors Should Pay Attention To: These are the rules and procedures a company uses to prepare its financial statements. Investors should carefully examine these policies to understand how the company records and reports its financial transactions. 1) One area to pay attention to is revenue recognition, which refers to the timing and method of recognizing revenue on the income statement. It is important to understand how a company recognizes revenue to ensure it is not manipulating its financial results, such as recording revenue too early when there are generous return policies. 2) Another is depreciation and amortization, which refer to the method a company uses to allocate the cost of its assets over their useful lives. Investors should understand these policies to ensure they are consistent with industry norms. 3) Inventory accounting, or how a company values its inventory, is a third key area. Investors should examine a company’s inventory accounting policies to ensure they are conservative and that the company is not overvaluing its inventory. 
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Inflation and rising rates continue to preoccupy investors. Markets are volatile as investors react to changing economic data and will continue to be. The pandemic's impact on global supply chains continues as well as rising geopolitical. Interest rates are unlikely to pull back anytime while a recession remains possible--can't predict its duration or depth.

Look at the company balance sheet. Can they keep paying those yields? When interest rates rise, that exerts the most pressure on preferreds. Are not a bad place to collect yield.

Industrials, energy and materials have delivered the biggest beats during earnings season. Tech has actually had smaller beats, while FAANG has taken off with this market.