BNN Bloomberg

BNN Bloomberg’s Market Call: Shane Obata – November 18, 2022 (Full Interview)

Middlefield Portfolio Manager, Shane Obata, appears on BNN Bloomberg’s Market Call to answer callers’ questions, give his top 3 stock picks and discuss his outlook on current market conditions

  • BNN Bloomberg
  • BNN Bloomberg’s Market Call: Shane Obata – November 18, 2022 (Full Interview)

Market Outlook:

We are entering a seasonally strong period for stocks. November to January is historically one of the strongest consecutive three-month periods of the year for returns. Potential tailwinds supporting this strength include:

(1) The upcoming mid-term elections in the United States.

(2) Acknowledgement by global central banks that rapid monetary tightening is starting to produce slowdowns in certain sectors of the economy, suggesting that the federal funds rate incorporated into the current dot plot will be sufficiently restrictive.

(3) A rebound in economic sentiment toward China, assuming the authorities begin to dial back stringent virus controls by the spring of 2023.

In our last monthly commentary, we discussed conditions that needed to be met before markets could form a bottom. A few, but not all, have started to move in the right direction. A pullback in the U.S. Dollar Index and benchmark two- and 10-year yields were key factors behind the strength in equities during October. However, we are still looking for evidence of a softer labour market and a comfortable bottom in forward earnings estimates, the latter based on anticipated lower profit margins going into 2023.

For the current rally to be sustainable, we need to see a clear change in U.S. dollar and interest rate dollar trends as well as valuations based upon more realistic earnings expectations. While encouraged by improvements in the various momentum indicators and market breadth, we continue to view the current gains as a relief rally.


Top Picks:

Amazon (AMZN NASD)

Purchased at US$101.26 on Oct. 28, 2022

While the recent quarter was disappointing – mostly from a margin and outlook standpoint – it did not change our long-term investment thesis for Amazon (AMZN). We continue to view AMZN as the best logistics company in the world and expect that it will show a significant step up in profitability and FCF generation in 2023 as Amazon Web Services and advertising become larger parts of the business. In addition, we expect that the retail division will show capital expenditure moderation after doubling the size of the fulfillment network during the pandemic. AMZN still trades at a premium to the market, but we think this is justified by its leadership positions in both e-commerce and cloud.

PepsiCo (PEP NASD)

Purchased at US$176.61 on Nov. 1, 2022

One of our preferred names in the staples sector. Pepsi (PEP) is not cheap; however, we believe that it can generate durable earnings growth for years to come. PEP has demonstrated impressive organic sales growth, mainly attributable to pricing power. As a result – and thanks to other cost-saving initiatives – the company has done a great job protecting operating margins. Given the extremely strong price realization we have seen in 2022, forward organic growth will need to come from a more balanced mix of price and volume. This combined with moderating input costs and productivity gains should allow Pepsi to achieve high single digit EPS growth in 2023 and beyond. Finally, we would note that PEP is expected to return nearly $8 billion (> three per cent of current market cap) to shareholders through dividends and buybacks in 2023.

Deutsche Telekom AG (DTE ETR)

Purchased at 18.19 EUR on Oct. 20, 2022

While we appreciate the stability of Deutsche Telekom’s (DT) local / German network, the key driver of our long thesis is DT’s majority (>50 per cent post-buyback) stake in leading U.S. operator, T-Mobile (TMUS). We believe that TMUS has the best network and value proposition, thus it is best positioned to continue benefiting from the 5G rollout in the U.S. Moreover, it is expected to enjoy a significant boost to FCF in 2023 due to lower capital expenditures (following Sprint integration) and the end of merger integration costs. We have chosen to access TMUS through DT because the latter has a very attractive valuation and pays a dividend, which currently yields over three per cent and is expected to grow at a greater than 10 per cent CAGR through 2024.

Disclosure Personal Family Portfolio/Fund

Past Picks: November 10, 2021

Block (SQ NYSE)

  • Then: $227.21
  • Now: $60.50
  • Return: -73%
  • Total Return: -73%

Meta Platforms (META NASD)

  • Then: $327.64
  • Now: $89.32
  • Return: -73%
  • Total Return: -73%

Airbnb (ABNB NASD)

  • Then: $192.22
  • Now: $92.25
  • Return: -52%
  • Total Return: -52%

Total Return Average: -66% 

Disclosure Personal Family Portfolio/Fund




Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. You will usually pay brokerage fees to your dealer if you purchase or sell units/shares of investment funds on the Toronto Stock Exchange or other alternative Canadian trading system (an “Exchange”). If the units/shares are purchased or sold on an Exchange, investors may pay more than the current net asset value when buying and may receive less than the current net asset value when selling them. There are ongoing fees and expenses associated with owning units or shares of an investment fund. An investment fund must prepare disclosure documents that contain key information about the fund. You can find more detailed information about the fund in these documents. Mutual funds and investment funds are not guaranteed, their values change frequently and past performance may not be repeated. Certain statements in this disclosure are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may”, “will”, “should”, “could”, “expect”, “anticipate”, “intend”, “plan”, “believe”, or “estimate”, or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Middlefield Funds and the portfolio manager believe to be reasonable assumptions, neither Middlefield Funds nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

This material has been prepared for informational purposes only without regard to any particular user’s investment objectives or financial situation. This communication constitutes neither a recommendation to enter into a particular transaction nor a representation that any product described herein is suitable or appropriate for you. Investment decisions should be made with guidance from a qualified professional. The opinions contained in this report are solely those of Middlefield Limited (“ML”) and are subject to change without notice. ML makes every effort to ensure that the information has been derived from sources believed to reliable, but we cannot represent that they are complete or accurate. However, ML assumes no responsibility for any losses or damages, whether direct or indirect which arise from the use of this information. ML is under no obligation to update the information contained herein. This document is not to be construed as a solicitation, recommendation or offer to buy or sell any security, financial product or instrument.

  • BNN Bloomberg
  • BNN Bloomberg’s Market Call: Shane Obata – November 18, 2022 (Full Interview)
Subscribe to Our Insights!
Flyout Form
Subscribe for MCT Updates
Flyout Form UK