Beyond looking at reported macroeconomic figures from the Federal Reserve or the US Bureau of Labor, individual company results can provide an alternative gauge of the economy and business sentiment. Our portfolio companies tend to be leaders in their respective industries, and therefore give good insight into various dynamics at play within their various sectors.

In the first quarter of 2024, results from our portfolio companies so far generally reflected the prevailing narratives of both the US and Canadian economy:

  • Blackrock and Moody’s noted that given strong equity markets and stabilized interest rates, investors and issuers are returning to stock and bond markets.
  • Results from Visa and Costco indicate that US consumer spending remains robust. Visa noted that this was true across income bands in contrast to reports from fast food chains such as McDonald’s and Starbucks (no position in either) that consumers are pulling back in discretionary spending. Domino’s Pizza and Restaurant Brands are performing well in this difficult environment.
  • Strong earnings from Microsoft,, and Alphabet suggest that business demand for cloud computing and advertising continues to rebound from the weak levels in 2022 and 2023 while generating meaningful revenues (and returns on capital) for AI-related initiatives.
  • Despite shares slipping, Netflix added 9 million new subscribers and is generating substantial free cash flow while legacy media competitors continue to struggle with declining viewership and the transition to streaming.
  • On the flip side, CoStar Group observed that the commercial real estate sector remains weak: vacancy rates for residential, industrial, and especially office properties continue to rise, while transaction volumes continue to be impacted by high interest rates. Results from Watsco, a leading HVAC distributor, and FirstService, provider of property management and renovation services, also indicate that home renovation spending remains weak.

Most Canadian companies have not yet reported, but weak results from Canadian National Railway and TFI International, both key players in the Canadian logistics industry, show evidence of weakening Canadian industrial demand, while results from Metro (no position) and CargoJet (no position) shows that consumer discretionary spending remains impacted by inflation and high interest rates.