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Globe and Mail
2 days ago
- Business
- Globe and Mail
‘June dips are buying opportunities': CIBC's Mokhtari on his latest market views and 10 top stock picks
North American equity markets rallied sharply in May. The S&P/TSX Composite Index posted a 10-day rally last month, which pushed the index above 26,000 for the first time. This positive momentum is not over, according to CIBC's chief market technician Sid Mokhtari. He is forecasting a move above 27,000 in the months ahead. Mr. Mokhtari publishes a monthly report with his Top 10 stock ideas and his disciplined process continues to lead to portfolio outperformance. He screens and selects stocks from the largest 100 members by market capitalization within the S&P/TSX Composite Index. In the first five months of 2025, his portfolio of stock selections delivered a double-digit return of 11.4 per cent, compared to a 5.85 per cent gain for the broader index. His stock selections also outperformed the S&P/TSX Composite Index in 2024, 2023 and 2022 by 5.8 percentage points, 6.3 percentage points and 2.7 percentage points, respectively. For June, his Top 10 stock ideas include nine additions and one carryover from the prior month. They are: Aritzia (ATZ-T), Eldorado Gold (ELD-T), Exchange Income (EIF-T), Killam Apartment REIT (KMP-UN-T), MDA Space (MDA-T), NGEx Minerals (NGEX-T), Parkland (PKI-T), Shopify (SHOP-T), Sun Life (SLF-T), and the lone carryover is Power Corp. (POW-T). On June 3, I spoke with Mr. Mokhtari to get his technical take on the markets. We also delved into his June stock picks and ETFs with attractive technical setups. In a report that you published on June 1, you said both the TSX Composite Index and the S&P 500 exhibit a 'cup and handle' or 'pole and pennant' pattern. Could you break down these technical terms and what it suggests for future moves in these two indices? 'Pole and pennant' and 'cup and handle' patterns are typically associated with accumulation as well as uptrend continuation. With a 'pole and pennant', you see a surge in momentum and a sharp rise in a share price or an index. Then, you have a shallow consolidation in a short time frame, and that needs to resolve itself in the direction of the momentum burst. We estimate that we saw capitulation in April. Coming off the April lows, breadth began to exhibit an expansionary phase and momentum surged. This forced broader indices to shift upward in a very sharp fashion, creating almost a V-shaped recovery that created the pole. If we're correct in our breadth and market internals estimation, indices may pause and create a pennant that is often associated with period of a shallow consolidation before momentum reemerges to the upside. With a 'cup and handle' pattern, you have a gradual rounded bottom pattern, and that's a shift in trend bias. You lose sellers and gain buyers. Then, you have a secondary saucer-like pattern that develops above the bigger rounded pattern. A 'cup and handle' is a technical observation that is often associated with accumulation tendencies and usually results on the upside. I would say 'pole and pennant' is the one that I see a lot among U.S. stocks. Within Canada, we see a lot more rounded 'cup and handle' patterns. And a 'cup and handle' pattern is often seen within commodity indices or commodities, in general. So, both patterns suggest the S&P/TSX Composite Index and the S&P 500 will exhibit a pause in momentum, or consolidation period, after which they will resume their uptrends? Correct. And how long do you anticipate that pause or consolidation phase will last? The consolidation is shallow in amplitude. In other words, dips are shallow. And the phase of consolidation is not an elongated one. It lasts weeks to a month or two. So, we think by summer, as we go into July, we should be at higher levels for both the S&P 500 and the TSX Composite Index. So, the adage 'sell in May and go away', might instead be 'buy the dips in June and go away'? I genuinely think that's the case. I think 'sell in May and go away' is the wrong narrative. Market internals are very healthy. They have improved significantly. Breadth is in good shape. We see broader participation of many individual names in both the U.S. and Canada and momentum conditions are good. So, any pushback in the month of June should be a buying opportunity. In fact, since the secular bull market began in 2009, when May is a strong month, you typically see follow-through strength into July. So, June dips are buying opportunities. So, I have a constructive bias, even based on seasonal characteristics. Are you maintaining your single-digit positive return forecasts for this year for both the S&P/TSX Composite Index and the S&P 500 Index? As of May 30, the year-to-date price return is nearly 6 per cent for the TSX and less than 1 per cent for the S&P 500. I am. My base case is either very low double-digits returns for both indices or high single-digit returns. During year one of the U.S. presidential cycle, the S&P 500 has a median return of 8.1 per cent and a hit rate of 58 per cent. (A hit rate is a measure of frequency of observations.) For the S&P/TSX Composite Index, the median return is 9.6 per cent, the hit rate is about 65 per cent. So you do have slightly higher relative observations for the TSX Index, also noting that, at least by our measures, we should be able to see better propensity for TSX index to hold itself better relative to the S&P 500 in the second half of the year. The S&P/TSX Composite Index broke above 26,000 for the first time last month and the S&P 500 is nearing 6,000. I know you're anticipating a potential pause in June, a shallow consolidation for a brief period, but if an uptrend does resume in the summer months where could these indices rise to? Fresh discovery becomes difficult once we begin to make new highs. For the TSX Composite Index, I am measuring 27,100 to as high as 27,500. That would be my amplitude measured move. For the S&P 500, 6,475 to as high as 6,500. And over what time period? I would not be surprised if we resolved that in the next few months. In a report that you published last month, you noted an improvement in growth and momentum factors and a rotation away from value, low volatility and dividend yield factors. Given your outlook for the uptrend continuation for major North American indices, will growth and momentum stocks continue to be the leaders? I think that's the case. We still see that factor rotation favouring growth and momentum. Offence versus defence is certainly showing a better technical backdrop. I looked at four sectors and put them together on an equal-weight basis, and they were financials, consumer discretionary, industrials and technology, and divided them by utilities and staples. So, I put the offensive sectors in the numerator and defensive sectors in the denominator, and there is a technical chart that shows this ratio does have better upside potential, which favours strength in the numerator or weakness in the denominator. Was that analysis looking at sectors in the S&P/TSX Composite Index? That was for the TSX. For the U.S., we see the same thing. For the U.S., we found that defence is also resting. We're seeing utilities pausing and drifting, staples pausing and drifting, but against them we're seeing technology leading and sharply showing strength. We're seeing financials continuing to show better relative and absolute performance. We also see 'Magnificent Seven' stocks starting to show a very strong set of positive reversals, and that's a very big weighting in the S&P 500. When we spoke in January, you said, 'Bitcoin is a vehicle that is slowly becoming of asset allocation importance.' You added that given the strong run, the price of Bitcoin could dip to US$80,000 or lower, which would mark a good level to revisit the cryptocurrency. Your forecast was accurate. In April, Bitcoin fell below US$80,000 before surging to a record high in May. What is your current outlook for Bitcoin? I noticed in your matrix table that ProShares Bitcoin ETF (BITO-A) jumped in its rankings last month and entered the top 10. Like the markets where we see a pause and refresh, this should also be applied to Bitcoin and cryptos. We don't see Bitcoin falling below US$90,000 on a pullback. We think it would be a shallow correction. On the upside, we measured it to be closer to US$137,000 to as high as US$150,000 for Bitcoin so there's a lot of upside for Bitcoin, in our opinion. We're also seeing miners that are associated with cryptocurrency mining show better moving internals. Miners are showing positive reversals and better improving technical backdrops. Could you highlight a couple of them for our readers? In Canada, there's Galaxy Digital (GLXY-T), which recently had a sharp move and has now pulled back. I think this pullback can provide another opportunity given the pullback is on thinner volume and we're already seeing a 'golden cross' pattern within Galaxy Digital. There's one in the U.S. that everybody looks at called Strategy (MSTR-Q), formerly known as MicroStrategy. That's another good one that is showing better share price action. Both the 50-day and 200-day moving averages are marginally rising. This is a very constructive pattern for Strategy. Do you have technical targets for Galaxy and Strategy? For Galaxy, we are looking at revisiting the previous high. In other words, we should get back to a $35 handle and we should also be able to push through $35 on the upside. We measure that move to potentially be to $44, $45 levels. Strategy should be able to get back to north of US$460, US$480 from where it is. This is effectively a chart that is heavily tied to Bitcoin. Are there other thematic ETFs that are exhibiting major moves, either higher or lower, in your matrix? We still like silver and gold. We had a pause because of their seasonality. We saw a slower pace of advance in the miners, VanEck Gold Miners ETF (GDX-A), VanEck Junior Gold Miners (GDXJ-A) and Global X Silver Miners ETF (SIL-A). These ETFs are showing positive reversals. Seasonal strength for both silver and gold tends to become stronger as you go into the end of the summer. Here too, I estimate that dips will be able to provide a buying opportunity for anyone whose interested in this space. We like gold. We like silver. Silver has underperformed. I think that gives silver better potential buoyancy relative to gold. Last month, you added TD Bank to your top 10 best ideas basket and you had an initial price target of $94. The share price closed the month of May at $94.77. Your technical target was spot on. This month, you removed TD from your top 10 list and replaced it with Sun Life. However, I noticed in your technical scorecards that multiple bank stocks continue to rank well. We find some of the insurance names to be less overbought relative to banks. I am of the view that banks have already put out a great set of earnings and a lot of good news may already be discounted in the share price. So, I would not be surprised to see a period of consolidation or a pause among the banks and maybe a rotation in favour of lifecos. The recent technical breakout in Sun Life share price is still new from a time horizon perspective, with a momentum buy signal that was triggered only three weeks ago. It is reasonable to suggest that many alpha capture models are likely overweight Sun Life stock. It has a durable relative strength backdrop. It ranks well in our matrix process with a big increase in its delta - month over month rank. Fundamentally, our desk is also positive on SLF based on continued profit improvement in the U.S., earnings growth, growth in Asia and share buybacks. Earnings per share estimates are coming in above consensus and there could be further upside if our views are correct for the U.S. equity markets head higher into summer. And your technical target for Sun Life is? We are measuring $93.10 to as high as $95 for Sun Life on the upside. I noticed that half of the securities on your top 10 best ideas list are at or very close to all-time highs, those being Power Corp, Sun Life, EIC, MDA and NGEx Minerals. They're not looking overbought or overextended to you then? We do believe the stocks that make 52-week highs are likely to make new 52-week highs as time progresses just because momentum begets momentum. It's also a relative ranking for me. So, Power Corp. is a defensive name. I always have to be balanced in my view when we construct a basket of top 10 best ideas to make sure that I have a cushion in case there is a measure of defence that develops during the month. So, I think Power Corp. fits that call. Power has already broken out of its range, and pullbacks should be supported. MDA is poised to breakout, I'm measuring $34 to as high as $36. It has a flat top that has been in place for the past 12 months and has gone to this same reference point a few times, and I think if you knock on the same door often, it will open for you. Parkland is an interesting addition to your top 10 best ideas list as it has a potential near-term potential catalyst. They received a takeover offer, which shareholders will vote on later this month. I've had this name in our basket in the past and I think this is a name that has a backdrop of a shift in trend, i.e. a 'golden cross' condition, which is your 10-week moving average over the 40-week moving average. Also, there's been a lot of positive divergences throughout the past six months. By divergences, I mean momentum has been showing bottom building - that's positive divergence. The breakout above $37 for PKI established what's called a 'double bottom' technical pattern that should bring about a measured move north of $42. So, I'm thinking PKI below $40 is attractive. Earlier you remarked on the importance of having a very balanced portfolio. Given the need to have a diversified portfolio, is there a stock that would have appeared on your top 10 best ideas list but due to sector constraints you weren't able to include it? AGF (AGF-B-T) is a great name. It has a positive trend shift in our work. It has a reasonable yield and a good longer-term relative strength shift. AGF is a name that we like, but it's also a name that is not liquid enough. But nonetheless, I do know the sentiment for AGF is positive. Technical scores and quantitative factors for AGF are positive. It's a good name that continues to show a $14 handle as a measured move. It's not added because there are other more liquid names that stand above it. Looking at global investment opportunities, European ETFs continue to rank well. In your global regional ETF matrix, the top five ranked ETFs, starting with number one, are the Global X MSCI Greece ETF (GREK-A), followed by the iShares MSCI Italy ETF (EWI-A), the iShares MSCI Spain ETF (EWP-A), and then two German ETFs - the iShares MSCI Germany ETF (EWG-A) and Franklin FTSE Germany ETF (FLGR-A). Do technical indicators suggest that the strength in European markets will remain intact or do you think this rotation to growth and momentum factors may lift U.S. focused ETFs? We find a very deeply oversold condition that favours the S&P 500 from a mean reversion perspective over iShares MSCI ACWI ETF (ACWI-Q), the All Country World Index. So, we would not be surprised to see a pause or consolidation with some of these strong runners like Greece, Italy or Germany or other regions compared to S&P 500, which is not as overbought. I do admit that my ranking order is still keeping the S&P 500 on the lower side. The U.S. has come up in its ranking to number 51 out of 64 that we monitor, a 10-point delta relative to previous months. So, the U.S. has come up but it's still in the lower bucket of our ranking process. An interesting move I saw was move higher in the iShares MSCI Hong Kong ETF (EWH). It ranked number 36 in your regional ETF matrix on April 29, and the latest figure I saw was number 7. We like Hong Kong. We like Japan. iShares MSCI Hong Kong ETF (EWH) and iShares MSCI Japan ETF (EWJ) both exhibit a very good technical backdrop, they're not overbought by any measure, and I think that it's reasonable to make the case that if you want to diversify from the away from the U.S., having exposure to those parts of the world would not be a bad idea. Generally speaking, we like iShares MSCI EAFE ETF (EFA-A). We still think that the U.S. dollar is probably going to stay at best flat to lower, and that should be able to buoy a lot of those regions. But, I am very cognizant that if we're correct about our estimation about the 'pole and pennant' pattern that has been developing and the V-shaped recovery that is developing within the 'Magnificent Seven' and with some of the U.S. mega-cap stocks, I would not be surprised to see the S&P 500 perform relatively better in the weeks, months ahead compared to Europe or other regions. Anything else that you want to mention to readers? We're seeing good breadth expansion within the REIT space in Canada. So, InterRent REIT (IIP-UN-T) was acquired last month. We saw a big move in the broader REIT space in Canada and we're seeing a better follow-through in the likes of Killam Apartment REIT. So, we added KMP to our basket. Killam is currently trading at $19 and change, it has a very strong band of support at $18.50, and notable upside potential closer to $20.50. It also has a good yield, so I think Killam is a good name to have in our basket. But it's not just KMP, we see a broad improvement within the REIT space. Breadth in TSX REITs has notably improved with the members having broadly recovered above their medium and longer-term averages. Both BMO Equal Weight REITs Index ETF (ZRE-T) and iShares S&P/TSX Capped REIT Index ETF (XRE-T) are showing better durability in their momentum readings that should support the sector from a buy the dip perspective. This Q&A has been edited for brevity and clarity.
Yahoo
13-05-2025
- Business
- Yahoo
NuScale Power Corp (SMR) Q1 2025 Earnings Call Highlights: Strong Revenue Growth and Strategic ...
Cash and Cash Equivalents: $491.4 million at the end of Q1 2025. Short-term Investments: $30 million at the end of Q1 2025. Revenue: $13.4 million for Q1 2025, up from $1.4 million in Q1 2024. Operating Expenses: $42.3 million for Q1 2025, down from $44.6 million in Q1 2024. Share Sale Proceeds: $102.4 million generated from the sale of 4.5 million shares through the ATM program. Warning! GuruFocus has detected 4 Warning Signs with SMR. Release Date: May 12, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. NuScale Power Corp (NYSE:SMR) remains the only SMR company with US Nuclear Regulatory Commission design approval, positioning it ahead of competitors. The company is on track to meet its 2030 delivery target, with significant progress in customer engagement and supply chain readiness. NuScale's RoPower project in Romania is advancing, with meaningful revenue and cash flow contributions, and discussions to extend the project into the detailed design phase. The company anticipates final approval from the NRC to increase power output per module from 50-megawatt electric to 77-megawatt electric by July 2025. NuScale has a strong balance sheet with cash and cash equivalents of $491.4 million, bolstered by a successful sale of shares generating $102.4 million in gross proceeds. Operating expenses remain high at $42.3 million for the quarter, although slightly reduced from the previous year. The company is still in the process of securing a firm customer order, with expectations set for the end of 2025. NuScale faces potential challenges from tariffs, although they do not anticipate a material impact at this time. The nuclear supply chain is tight, with a limited number of suppliers, which could impact the ability to fulfill multiple orders simultaneously. NuScale's cash flow is dependent on securing a customer contract, which remains uncertain despite ongoing discussions. Q: Can you clarify what constitutes a "firm customer order" by the end of 2025, and what steps are necessary to achieve this? A: John Hopkins, CEO, explained that the focus is on closing near-term contracts rather than pursuing MOUs. They are negotiating term sheets with customers, who are interested in seeing the production process. Hopkins is optimistic about securing a pivotal contract this year, with discussions centered on long-term Power Purchase Agreements. Q: How might recent draft executive orders from the White House streamline the nuclear licensing process? A: Hopkins noted that while it's too early to determine the impact, NuScale is on track with the NRC for their 77-megawatt approval by July. He emphasized that safety rigor will not be compromised, and any streamlining would not affect the core safety standards. Q: How quickly can NuScale deliver modules after securing an order, particularly for a US power plant? A: Hopkins stated that long-lead items have been in progress for years, and Doosan is prepared to produce modules. If a contract is secured soon, delivery by 2030 is feasible. CFO Robert Hamady added that NuScale expects positive cash flow from module sales once a contract is signed. Q: What is the likelihood of securing a large tech company as a customer for your SMRs? A: Hopkins indicated that discussions with Tier 1 tech companies are advanced, with NDAs in place. He emphasized NuScale's readiness as the only near-term deployable SMR, which is attractive to tech companies needing significant energy. Q: Can you provide more details on the RoPower project's Phase 2 extension and its implications? A: Hamady explained that RoPower is taking a measured approach, funding the second step of FEED Phase 2 to ensure comprehensive engineering studies for a Final Investment Decision. This approach provides assurance for moving forward with the project. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
