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2023, Welcome All (Except in Canada?!) | Long $LEDS

Well folks, we hope the New Year’s weekend treated you well and that 2023 breeds health and wealth for you and your loved ones, all year long!

Anyways, there’s a whole lot already kicking this year off with a bang! Starting with Canada’s Foreign Owner Ban - read on below how Canada is seeking to deal with sky-high real estate prices in a somewhat unorthodox manner. Further to the macro front, the slew of economic announcements presenting themselves within the US caps off with the all-determining unemployment update on Friday - which is sure to play a large role in dictating the Fed’s tone and agenda through Q1 24’.


Markets in Review

The stock market is decidedly up in the premarket of the year's first trading session with the Dow, S&P and Nasdaq respectively +45, 52 and 74 bps at time of writing. Starting off this year, the short end of the US treasury curve is pushing a 4.8% yield - by comparison, a year ago this time saw the short end of the curve well below even 1% (both curves pictured below). It is worth noting that the market is pricing in a 75% probability of a 25 bp interest rate hike at the February 1st FOMC meeting. For a recap of all the major 2023 market outlooks by leading financial institutions, click here.

Lastly, as Q4’s reporting period starts to ramp up the following is a final review of Q3’s earnings results by the data as well as a preview of the (few) issuers announcing this week: Earnings Growth: For Q4 2022, the estimated earnings decline for the S&P 500 is -2.8%. If -2.8% is the actual decline for the quarter, it will mark the first time the index has reported a (year-over-year) earnings decline since Q3 2020 (-5.7%). Earnings Revisions: On September 30, the estimated earnings growth rate for Q4 2022 was 3.7%. Ten sectors are expected to report lower earnings today (compared to September 30) due to downward revisions to EPS estimates. Earnings Guidance: For Q4 2022, 63 S&P 500 companies have issued negative EPS guidance and 34 S&P 500 companies have issued positive EPS guidance. Valuation: The forward 12-month P/E ratio for the S&P 500 is 17.3. This P/E ratio is below the 5-year average (18.5) but above the 10-year average (17.1).


Long: SemiLEDs Corporation (LEDS-NASDAQ) | Timeline: 2 days

SemiLEDs Corporation (LEDS), which develops, manufactures, and sells light-emitting diode (LED) chips, components, modules, and systems internationally, reported first-quarter fiscal year 2023 financial results this morning. Though the company reported a loss in quarterly revenue, both EPS and gross margin increased by 56% and 7%, respectively. (Full Story) Turning to the chart, LEDS had been riding a very strong support level of around $2.20 from the beginning of May to the beginning of December, before investor sentiment turned bearish going into the new year. That said, as selling has been exhausted, signalled by the Stochastic RSI on top of long wicks in the most recent candles, it is likely LEDS will receive quite bullish sentiment, resulting in a retest of its previous support level over the next couple of trading days.


Zooming out...

Canada’s Foreign Owner Ban

As of New Year’s Day, a regulation banning foreign owners from purchasing residential property in Canada has come into effect. While the ban is only instituted for two years- the legislation has been celebrated by prospective Canadian home buyers, both young and old as over the past two decades Canada’s housing bubble has been one of, if not the largest in the world.

Although foreign owners only make up between 2.6% and 6.2% of the total ownership pool within residential properties in the provinces which reported data to the census; their absence will likely be felt in an already illiquid Canadian market. While not to a tremendous degree, we predict that this barring will continue to cool the already downward-trending Canadian housing market in addition to the compounding macro effects of higher interest rates and higher consumer costs. Zimbabwean Exports… In a stunning turn of events over the weekend the Zimbabwean government has banned the export of unprocessed raw lithium and lithium-bearing ores. This will force any company with Zimbabwean lithium properties to build local processing plants which could take between two and three years to complete. Fortunately, companies in the midst of building their refinement plants will be excluded from the directive. While understandable from the local government’s perspective as more sustainable economic activity will occur within the country- the international community’s reception may not be warm considering Zimbabwe’s large lithium reserves and the massive forecasted demand expected to hit global markets in the years to come.


Making headlines...

Tesla Delivers Record 405,278 Cars in Quarter But Misses Target

  • Tesla Inc. delivered fewer vehicles than expected last quarter despite offering hefty incentives in its biggest markets, reinforcing demand concerns that contributed to the worst month and year for the electric-car maker’s stock since its 2010 initial public offering. (Full Story)

UK trains disrupted again as workers stage fresh strikes

  • Commuters returning to work on Tuesday after the Christmas break were advised not to travel as tens of thousands of British rail workers stage a fresh round of strikes that will disrupt services all week. (Full Story)

Russia's Oil Flows Slump to 2022-Lo

  • Russia's crude shipments slid to the lowest for 2022 in the final four weeks of the year as sanctions crimped Moscow’s exports. (Full Story)

Here's what's next for the tech sector in 2023

  • Wall Street analysts explain why they think tech is headed for a huge rebound in 2023. (Full Story)


Chart of the Day: Investing by decade…


“Treasure the love you receive above all. It will survive long after your good health has vanished” - Og Mandino


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