I hope you had a great long weekend. The markets continue to soar in 2024 as the odds of a soft landing of the economy continue to increase.
As I’ve mentioned before, it’s important to soak in the feeling of solid returns, but it’s also important to understand that this is an outlier over the long term. There is nearly a century worth of data highlighting that the stock market will return 8%-10% annually, on average.
Understanding that years like this are outliers can help us make better decisions and not chase returns when the markets have down or softer years.
When will the years occur that bring the market returns down to a more normal return level? It’s impossible to say. We could see multiple consecutive years of 15-20%+ returns, defying what many deem logical. Or, we could see the markets give back 15-20% as early as next year.
This is exactly why I’ve advocated for years to simply buy strong companies and hold them for the long term. Yes, we have to withstand the harsh drawdowns that many don’t want any part of.
But we also reap the benefits of large runups like this and don’t run the risk of missing out on them by attempting to time the markets by selling in and out.
This week’s newsletter will be a simple one. I’ve got my portfolio moves, the launch of the beta testing of our new screener, and a single featured company here reporting earnings.
Let’s get into it.
My portfolio moves
It was a relatively simple week for me. I used the rest of my cash proceeds to buy my second chunk of recent Bull List stock WSP Global (TSE:WSP. You can read our full report on WSP here to get my overall thesis as to why I added.
WSP now makes up a 3.5%~ position inside my portfolio, and I plan to keep it at that.
Outside of this, I just used regular weekly contributions to add to Bull List stock Boyd Group Services (TSE:BYD) and Foundational Stock Telus (TSE:T).
I’ve spoken for months now on why I’ve been adding aggressively to these positions. If you’d like to read as to why, just check out previous newsletter issues.
My additions to Telus are complete, and my most aggressive additions will now be put towards Boyd for the foreseeable future.
Our beta screener is launched
I spent the vast majority of last week (and this weekend) working on getting our new stock screener live.
I managed to do this and can officially announce that our screener is live in beta testing.
I am fairly confident this stock screener will be one of the most powerful tools in your arsenal for monitoring your current holdings and identifying new stocks.
To access the screener, simply login to your Stocktrades Premium account and head to the “Screener” portion of the menu. From there, simply agree to the conditions of the beta testing, and you’ll have full access.
The one thing I ask is that because this is in beta mode, please relay any bugs or issues you see to me so I can get them fixed as soon as possible.
The point of going into beta testing is to collect bug information and user experience information so that I can make adjustments and get the screener to full launch as soon as possible.
I’ve made a short introduction video to show you how to utilize the screener fully. I plan to develop a fully-fledged tutorial once the beta testing is done and the screener is fully launched.
CLICK HERE TO WATCH OUR INTRODUCTORY VIDEO
After you’re done that, click below to access our screener
CLICK HERE TO ACCESS THE SCREENER
Aritzia Earnings
Aritzia continues to post strong quarterly results, with beats on both the top and bottom lines. Revenue of $615M topped expectations of $584M, and earnings per share of $0.21 beat estimates of $0.1495 in a big way.
The company’s US growth is returning in a big way, which is likely to be a significant tailwind for the company moving forward. US revenue grew by 23.9% year-over-year and now makes up 56% of the company’s total revenue.
If you’ve been a member long enough to go back to when we first added Aritzia to the Bull List, this US revenue figure was in the mid-40% range, highlighting how fast it is growing in the United States, a market that is 10X the size of Canada.
Margins still have a ways to go to get back up to pandemic levels. Still, there has been a notable improvement over the last year, with gross margins increasing 5%~ year over year and finally breaking the 40% mark again.
The company now generates nearly a third of its business through online sales, highlighting the permanent shift to online ordering that I’ve spoken about many times before.
Operationally, the results were fantastic, and the long-term thesis remains well in place for Aritzia. However, the company faced some post-earnings selloffs, likely related to the guidance.
One thing I will say outside of the guidance, however, is the fact that selloffs like this are nothing to be concerned about, especially when the stock has gone on a run. It is easy for us to fret over a 5% dip while ignoring the fact that the company is up 82% on the year. We must learn to ignore the ebbs and flows of the market and let short-term traders dictate short-term prices while we accumulate shares of strong companies for the long term.
The company issued guidance expecting revenue to come in at $2.54B-$2.6B. This is technically a “downgrade” in guidance, because its previous high-end outlook was for $2.62B. I consider this borderline immaterial, as this is a 0.7%~ downgrade to the top end of its guidance. This represents 9%-11% growth on a year-over-year basis, a number I am perfectly fine with considering the environment.
This is a mid-tier fashion company that could easily be cut out of many consumer budgets in times like this. However, it continues to excel and grow earnings and revenue at a near double-digit pace. When rates decline, consumer spending increases, and the economy picks up. I believe Aritzia can get back to consistent double-digit levels of growth and cash flow generation.
You can read our full report on Aritzia here
