BNN - Thursday, May 23, 2024 - 11:00 a.m. (ET) - Segment #2

>> Welcome back, our next guest teacher cyclicals over defence is a U.S. over canada and he's bullish on commodities. Mike archibald is vice president and portfolio manager at agf investments joins us right here. Thanks for coming in ticks around. Why don't we start with crude oil and we can put up on the screen, something that our viewers multiple times during the day here at bnn bloomberg. And that's the one year history of west texas intermediate crude in the in like to begin as this languishing this come down in the share the the mid-eighties 86 or so to 77 where we are now. What's your outlook for the fort for the commodity itself and for the share price is a big produces. >> Yeah, certainly there's been a lot of volatility and a lot of this is risk, obviously, that you're seeing in the middle east. Certainly, we think the supply demand of the energy commodity is actually fairly opec take a lot of production out of the system that looks like it's going to continue to stay. So you know, we've been calling for 75 to $9 oil. We're sort of getting back closer to the low end of range. So we've been buying some commodities recently. I do think the stocks offer a great opportunity here. They really clean up the balance you know, certainly, I think there's some growth to a number, the names, we can talk about a few of those as well, but we are bullish on commodities and energy would be part of that next. >> And I believe one thing we've seen recently is that the, the stocks have tended to outperform this decline in the commodity. Is that correct? Another was in fact, a investors see opportunity in these over the names that are not selling them off. When the price of oil dips as they have in the past that struck. So they they have performing for a while here. I think part of the reason for that is that a lot of the economic data that we're looking at, the leading economic indicators that we pay attention to. >> Look like a bottom in the number of parts of the world. And we think that's very bullish for commodities in general. So whether that be copper or energy or or aluminum or nickel or other areas of the market. And so I think that's really the theme that we're we're seeing right now. Seesaw good data this morning out of germany saw another great data out of the U.S. looks like you've got a bottom in china. So we really think that commodity demand is going to pick up in the back half of the I think the reason why stocks are doing so well as we're just in the early cycle of the estimate, moving to the upside. So stocks are relatively cheap to balance sheets in much better position than they were a number of years ago. I think there's good opportunity for the khemaies continue to move higher. And if that happens, I think stocks fall. Let's to talk about copper. Another huge story in the stock market for reasons that viewers understand the metal has exploded in price. And all of the canadian copper miners are up in a big way. >> Yeah, lots of moves in commodities as I mention and certainly copper's one, it was a bit of a probably into the middle of q1. And then it's just exploded to the upside. >> Lot of that has been on chinese buying. And certainly, as I mentioned to you before, there's a lot of, you know, stimulus coming in china and that's really driving the demand for copper. The equities have been great performers here, obviously saw some some money get race this week with today. So that may continue in the space just given where the copper prices tech resources is a name that we own in that continue to really like that business. I just think that, you know, where copper prices right now. So for have it on the screen of these companies are making so much free cash flow, you know, putting out towards you to share about share buybacks or no areas of growth. And so we really like the space as well. >> Okay, let's talk about 2 stocks. You like a particular and they are also commodities stories, cameco. The huge uranium producer has had a huge over the past 18 months or so. And arc resources. And that gas producer. >> Chemical is a large producer of uranium, as you know. And as you said, stocks, you know, hitting nearly all time highs or buy some earlier this week, really like the outlook for uranium paul. So there's, you know, a couple of themes that I think are are driving this and obviously there's an increase in in power demand that's happening because of the theme of ai. And you have more data centres being built, you need more electricity in order to to run those. And then you have reshoring as well. So that we're operating in global footprint are now bringing their facilities back into the U.S. primarily that's requiring them to build more facilities or expand the size of those not requiring no more power. And people looking for cleaner sources of of power to do that and nuclear certainly fits that bill. So we really like this, you know, the price of your hand. He's gone from $30 a pound a couple years to $90 on the spot market. So it's moved a lot, obviously, the financials of of cameco have followed along suit with that. I think what's important, those long-term pricing for the utilities is somewhere in the 70 to $75 range, which is very economic explain that number to us. The long-term pricing in the utilities sector, is that what they're paying for your correct? So they would, they would sign long-term duration contracts, anywhere from 5 to 10 years. And that be in the 70 to $75 range, which is very economic for cameco. >> And then the other big thing here is just the biden administration put in some restrictions last week on the import of russian uranium into the U.S. and that represents

about 10 to 12% of the overall market. The natural benefactor of is going to be cameco. They have a low cost operation, they can, you know, produce more than they currently are. There are not at scale and they can fill that gap, that utilities are going need us. So. >> Huge upside to the numbers, obviously from sales perspective, margins are moving higher. Profitability is moved up a we still think there's upside the stocks. Okay. Arc resources, yester, not gas. Some of the similar themes that I just mention would would apply to arc as well. So when we looking in the energy space, we're generally looking for 3 things. We want to see some production growth. We'd like to see a clean balance sheet and then you'd obviously like to see some free cash flow and are ticks the box at all 3 of those. So currently producing around 350,000 barrels of having that hachey project, which they're just in, you know, kind of the middle stages of completing that you come online later this year that will move production up -closer to 400,000 barrels. The boushie is very clean, so they're very well capitalized and they generate a huge amount of a free cash flow. So the new facility coming on, will allow them to buy back even more stock, you know, or potentially increase the dividend as well. And obviously, they have a lot of leverage to natural gas prices. And so, you know, we've seen a move up in natural gas caught one 60 or so up to your call to 80 or so. Right now, every $0.50 move in the gas price represents around 200 million in free cash flow to chark. So really like this very well managed. I think they're going to continue to buy back a lot of stock increase to devon. And this is a name that again, we're buying this week more broadly, you favour canadian stocks over U.S. stocks and the commodity narrative much must be a big reason absolutely so I think, you know, there's still upside here and taken in canada continue to be underweight. >> Broadly to to commodity. If we get that happening, if we get some interest rate cuts in canada, the financials can turn you know, canada should be a pretty good place for capital in the next 6 to 12 months. Mike, thanks a great deal for being here. Thanks mike archibald is vice president and portfolio manager at agf investments. Shares of nvidia have extended their rally. The stock is now up by the most since february will digest those companies. Earnings results. >> With bloomberg's divya balji right after this. (Upbeat instumental music)Canadians are facing a newnormal with interest rat and investment options. The Capital Direct OneIncome Trust is in a growing asset class thatprovides stability and is income-generating forportfolios. Here from Capital Direct areEire Gorman and Aaron Narayan, great to see you again. Thank you for havingus back, Mark. Eire,how are interest rates impacting the Capital DirectOne Income Trust? It's really important tounderstand the timeline of the loans that make upthe income trust. These are fixed-term vehiclesthat don't have the volatilityof a variable product. That means we're less-vulnerable to interest rate changes for18-24 months. Aaron, what arethe pros and cons for the trust if interestrates go down? First off, we love stability. Looking forward, we believe interest rates willact in our favour. If rates go down then (Unclear)or now Cora drops which means the cost of capitalis actually cheaper. And what if interest ratesstay around these levels? Aaron: If interest ratescontinue to stay the same we continue to kick out similarreturns as we have been for our investors which makethem extremely happy. So the trust holdsresidential mortgages. Based on what you're seeinghow would you say Canadian homeowners are coping in thisnew interest rate environment? This is a good news story. Canadians arefinding ways to cope. Our mortgage investments andflexible lines of credit have allowed homeowners toconsolidate at a lower rate and continue todo the things they love while owning their own homes. As we said here, homeownershipis so important to Canadians and we've seen the choices thatthey have made to remain in this privileged category. And it's also important to notethat throughout this new normal we've kept our loaned valueat a very comfortable 52%. If advisors or investorsare interested how do they reach you? Yes, Portfolio Managers andFinancial Advisors can find us atincometrustone.com. And for direct investorsyou can call us anytime at 1-800-625-7747. Closed captioning of this bnn Bloomberg program is brought to you by Stenner Wealth Partners of cg Wealth Management. Outgrown your advisor? We manage portfolios of over 10 million dollars. Welcome back, nvidia stock is soaring up by more than 9% after the bullish sales forecast. It issued after the close yesterday. Excited investors. Let's talk about it with bloomberg's divya balji says managing editor for breaking news, america's at bloomberg news in toronto. Divya, great to touch base with you again. Let's go through those nvidia earnings and what has impressed the market so much.

Copyright protected and owned by broadcaster. Your licence is limited to private, internal, non-commercial use. All reproduction, broadcast, transmission or other use of this work is strictly prohibited.

Transcripts