Allen's Analysis Blog

Weekly Market Comment

January 24th, 2020

“People tend to grossly overestimate what technology can accomplish in the short term, but grossly underestimate what it can accomplish in the long term.” – Russ McMeekin, C.E.O. of mCloud Technologies

The TSX Composite was flat this week while S&P 500 lost 1%.

Technology stocks continue to be white hot. As Ned Davis Research points out, looking at the entire MSCI All Country World Index, the U.S. represents 56% of index. Of that, almost a quarter is information technology. And of that, 37% has been represented by two stocks: Apple and Microsoft. In other words, those two companies represented 5% of the broadest world stock market measure. That’s bigger than every other country’s representation in this global index except Japan.

We aren’t complaining that tech stocks remain popular. Not only do we own Microsoft, but we bought XBC just a few weeks ago and it’s up over 30%. All of our clean-energy companies are tech related and are up 8-10% this week alone. We trimmed a bit of our Boralex and Innergex holdings for Legacy Income Growth and Select. We’re just trying to be prudent and proactive. Such insatiably strong moves aren’t common. Our goal is to re-purchase the positions cheaper.

One driver of clean-tech and ESG-minded stocks was a letter written by the head of Blackrock, Larry Fink. ESG stands for “environmental, social and corporate governance” and more and more investors are seeking – some even demanding - companies with strong ESG ratings. Blackrock is the single largest fund manager and ETF provider on earth and when their CEO Larry Fink speaks, corporate CEOs listen. Fink, in his annual letter, warned CEOs that Blackrock will vote against management teams that they deem to be dragging their feet on ESG related issues. The main reason is because investors in Blackrock, which is pretty much everybody who invests, has been pressuring and even protesting for more corporate accountability. So that’s what Fink is increasingly demanding.

Technology encompasses more than just electronics. Remember our little Burcon Nutrascience investment? They are the ones who can make an extremely high quality protein powder – fully and permanently soluble in most liquids and with minimal flavour – from vegetable sources. Today, they announced a long-term collaboration with the largest food and beverage company in the world, Nestlé. Yes, you read that correctly. Our little Burcon is now working with the biggest of the big food makers. To what end? We don’t know yet. But it’s probably not going to be small potatoes. Nestle doesn’t mess around with “small” anything.

“Developing nutritious and great-tasting plant-based meat and dairy alternatives requires access to tasty, nutritious and sustainable raw materials as well as proprietary manufacturing technology,” says Stefan Palzer, Nestlé Chief Technology Officer. “The partnership with Burcon and Merit will give us access to unique expertise and a new range of high-quality ingredients for plant-based food and beverages.” Boom! There it is.

Notable reads:

Musings Beyond The Markets

Studies have shown that candle use – especially scented ones - is toxic and associated with Alzheimer’s, birth defects, cardiovascular disease and who knows what else.

Chances are you’ve never given it much thought and just accepted the notion of candles being relaxing, calming and romantic. In fact, candles are toxic and therefore bad for our health, especially in enclosed areas. That includes soy candles marketed as a healthy alternative with evidence-free claims and trendy jargon. Don’t believe it. From “Scented candles can release millions of toxic particles in your home”:

“When scented candles are burned, they give off tiny particles, so small that you could fit a thousand of them across a single human hair,” Booker told the Daily Mail. “The problem with particles this small is that they can get into the bloodstream, and they have been associated with both short- and long-term health problems, including asthma and cardiovascular disease.”

“But they have also been found in the brain, where they are associated with Alzheimer’s, and have been found in the placenta of pregnant women, and have been associated with low birth weights and birth defects.”

Experts believe the problem may be worsened by the way that candles are often used in the home. “You tend to light them in small, enclosed spaces, such as bathrooms, and they’re often used in winter when windows are kept closed,” said Booker.

While candles have been traditionally made from paraffin wax, there are some brands that claim to be more natural. The lab testing, however, demonstrated that using beeswax, soy wax, or other alternatives does not necessarily improve the air quality that results from burning the candles.

You can read more here, here, and here.

Word of the week

uncouth (adj.) – lacking good manners, refinement, or grace. “Time makes ancient good uncouth” – James Russell Lowell