Stock Talk Podcast Episode 282 Show Notes

KeyStone’s Stock Talk Podcast Show 282 – it is our annual predictions show, where we take a quick look back at 2024 and make bold predictions for 2025.

Let’s get to the show – I welcome my cohost, Mr. Aaron Dunn, and killer B’s, Brett and Brennan!

Poll from the last show or week:

Predictions Show.

I preface this by saying – economic forecasting is for fools!

Our job is to look at individual companies – focussing more on what we can control. Helping our clients find and buy great growth and value companies to help them build simple 20-25 stock portfolios.

Stocks like the following companies recommended over the past 18 months including:

This is just their performance over the past year – not from their original recommendation prices – in the cases of VitalHub for example, the stock was recommended at $3.24 in November 2023 and is now up 250%, Cipher was recommended in September of 2023 at $3.89 and is now up 281%, and Firan which was originally recommended at $1.35 and is now up 447%.

These are companies you will not find with your Big Bank advisor and 2024 was a great year for our research in this regard.

I have included these companies (as I will note, we do not often include companies in coverage as our clients pay for that research and for KeyStone to help them build 20-25 stock portfolios with that research)….I include these because they are all current HOLDs. There are several other companies that have increased 100% from our coverage that are BUYs for our clients or close to buys that I do not include today.

Recently released: KeyStone’s 2025 Cash Rich, Profitable Small-Cap Report. 

M&A activity picks up in 2024: 

A full 10% or 6 of the 59 companies included in the 2024 Version of this report were involved with either a merger, were acquired or taken private and all at premium prices. While valuations on average in the 2025 group of ~75 companies are significantly elevated from the 2024 report, we continue to expect M&A activity in this group of profitable, net cash businesses. In fact, it is a hallmark of the report which never fails to identify takeover targets on an annual basis.

We expect to have some new recommendation in a smaller special report over the next 3 weeks.

RYAN’S PREDICTIONS

2024 Predictions:

1) Double Down on my AI prediction – this is where shenanigans really start and silly season for promoters will accelerate…there will be a plethora of TSX-Venture AI stocks – market participants should beware in 2024. At some point in 2024, it will get silly and their will be AI stock podcasts, sites, conferences and 10% of the TSX-Venture will be an AI stock.

2) The simple call is to say “Small-Caps” will outperform in 2024 – after a number of years of underperformance. For me, not all small caps are the same and there remains a significant risk of a more broad or traditional recession in 2024, which is a risk off trade and not good for smaller companies in general. I would say that value based (I would like to say quality small caps, but there is not an index that tracks that) will outperform in 2024.

We could track value through – the MSCI US Small Cap Value Index captures small cap US securities exhibiting overall value style characteristics. The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price and dividend yield.

Our small-caps outperformed – generally large caps outperformed small-caps – the key is that we did our job. 

3) Housing prices start to finally decline – the second half of 2024 – rates will eventually reset. They are hoping for lower rates when homeowners renew mortgages – they may indeed be lower, but I do not foresee anything close to the sub 2% many bought at with little wiggle room – there their may still be trouble looming.

This is a risky prediction as we should never underestimates Canadian banks creativity in solving homeowners near-term mortgage cash crunches. We could start to see 40-55 year mortgages, which I am sure the banks would prefer to foreclosures.

General Predictions – with the proliferation of AI – Deep Fakes will become more of an issue in 2024 – there will be one or two significant incidents that we will hopefully learn from.

Prediction #1: Stubbornly high inflation does not end below 2% in 2025.

The Federal Reserve and interest rates

Some people expected a downturn in 2022 – and again in 2023 and 2024 – due to the Federal Reserve’s hawkish interest-rate decisions. The Fed raised rates rapidly in 2022 and held them high throughout 2023 and much of 2024. But in the last four months of 2024, the Fed has cut rates three times – most recently on Dec. 18.

Inflation has declined significantly from its post-pandemic highs. However, it will remain stubbornly high in 2025. And the Fed’s hints that fewer rate cuts will be on the way will become a reality due to persistent inflation.

Specific prediction: The PCE price index, the Fed’s preferred inflation gauge, which is currently 2.4%, will end 2025 above 2%.

The Federal Reserve seeks to achieve inflation at the rate of 2% over the longer run.

Prediction #2: New capital gains proposal dies in 2025.

If the government falls, the capital gains proposals will die. In tax law, it is very common for many technical tax changes to die when an election is called. But it is also very common for such tax technical changes to be reintroduced by the new government, even if the new government is being led by a different political party.

Why? Because such amendments are often technical clean-ups of the Income Tax Act and generally do not have broad-based application. In other words, most such amendments are not controversial. The capital gains proposals, however, do not fall into that category. They are broad-based and certainly controversial.

Specific prediction: The Liberals proposed new capital gains tax will either die as legislation (not be passed) or be repealed in 2025.

As an aside, if the capital gains tax increase does not move forward or is removed – it is another example of why one should not base their investment strategies on proposed or even enacted policy from a sttign government as that policy can be changed in the near or mid-term. At the time, the capital gains tax was proposed, we fielded may questions on whether or not clients should immediately sell a number of companies they held that had very strong gains. We will most often advise that you should only sell the stock for stock specific or investment specific reasons – like it is overvalued – not due to a tax issue (in most cases) as these concerns are most often secondary and the tax situation can be unpredictable. The most important element in investment success is holding the right companies long-term, not any tax strategy.

Prediction #3: Information technology continues to outperform S&P 500 in 2025.

Specific prediction: The S&P 500 Information Technology Index will end higher than the S&P 500 Index in 2025.

Prediction #4: Trumps “Drill, baby, drill” helps energy service stocks more than energy producers.

It’s likely that the energy sector will also be impacted by deregulation with President-elect Trump’s campaign pledge to “drill, baby drill.” Policy such as this often takes real time to take hold, so the prediction might be right ultimately by can take a year or more to cut through the existing red tape. Increased drilling could help energy stocks in some ways but hurt in other ways. Fewer regulations could make it easier for oil companies to do business. However, higher domestic oil production could cause oil prices to fall and negatively affect oil producers’ earnings.

Higher drilling should help energy service stocks – this tends to lag so the impact may not actually be felt until closer to the end of 2025.

Specific Prediction: Fidelity Select Portfolios – Energy Service Portfolio (FSESX) or another good US energy service index or ETF we can find will outperform the iShares U.S. Oil & Gas Exploration & Production ETF.

Additional predictions:

• MrBeast is offered a cabinet position.
• Barron Trump is offered the position as his father’s key political advisor but instead opts to try his hand as a Power Forward in the NBA.
• Trudeau will resign in 2025.
• Trudeau will face scandal in 2025 (likely involving SpongeBob).

AARON’S PREDICTIONS

2024:

Prediction 1: Bank of Canada & Fed Start to Cut rates in Q3 2024.
Prediction 2: Another revolutionary advancement in AI released during 2024 and continuation of the AI arms race.
Prediction 3: Dividend stocks will outperform in 2024.

2025:
Prediction 1: The Bank of Canada will cut rates by at least another 100 basis points in 2025.
Prediction 2: Canadian REITs will produce a total return between 10% and 15% in 2025.
Prediction 3: The Conservative Party of Canada Will Win a Majority in the Upcoming Canadian Election with At Least 180 Seats.
Prediction 4: Trump Media & Technology Group (basically Truth Social) Will Be Acquired by Twitter (currently X).

BRETT’S PREDICTIONS

2024:

Prediction 1: Oil (WTI) will remain below $90 for the year
Prediction 2: S&P500 companies will have positive returns in 2024. For comparison 2023 saw 62% of companies rise in price over the year.
Prediction 3: The US Fed is going to manage to have a soft landing ( no substantial increase in inflation no recession).
Prediction 4:  Canadian REITs will perform well in 2024 >5%, can use S&P TSX Capped Reit Index

2025:
Prediction 1: CAD will appreciate against USD by the end of the year.
Prediction 2: Palantir (PLTR:NASDAQ) will close lower at the end of the year. $76.49.
Prediction 3: Volatility will be higher in 2025 than in 2024. Above 14% realized daily close volatility for 2025.
https://www.cboe.com/us/indices/dashboard/rvol12m/
Prediction 4: Bitcoin will set a new all-time high during the year ~108.4k (changed to 130k) but end the year below 100k.

BRENNAN’S PREDICTIONS

2024:

1) On an Absolute Basis I predicted that Utility Stocks will perform better in 2024 than in 2023 measuring the success using BMO’s Equal Weight Utilities Index ETF (ZUT:TSX).

The basis for my prediction was that rates would be going down providing cheaper financing to utilities which are highly levered and sentiment of dividend stocks increasing as investors flock from bonds to higher yielding stocks.

In 2023 the Index (ZUT:TSX) was down -11% and in 2024 the index was up 11% – so my prediction was correct. THIS WAS SOMEWHAT OF A SOFTBALL…

2) I predicted Small Caps would outperform in 2024 – primarily due to the value gap between the S&P 500 Large-Cap and the S&P 600 – measuring the relative performance of the S&P 500 and the S&P 600 Index.

Andddd  I was wrong… it ended up being a very strong year for the S&P 500, up 26% – driven by the magnificent 7 (AAPL / AMZN / MSFT / META / GOOGL / TSLA / NVDA) which produced more than half of the S&P 500’s 26% annual return. Meanwhile the S&P 600 returned around 12%.

3) On an Absolute Basis, Tesla (TSLA:NASDAQ) would decline during 2024, from its then current price of $256.50. This was based on Tesla’s declining profit margins as they slashed prices to maintain market share, potential lower demand with elevated interest rates, and more competition from large manufacturers releasing EVs. 

ANDDDDD  I again couldn’t have been more wrong… The stock briefly declined following slower growth and reduced margins, prompting me to take a victory lap in April when the stock was down 30%…. and on that podcast I stated “we all know that because I am bringing it up (taking an early victory) the stock is probably going to go up to $300 by the end of the year”… And despite the first 9 Month revenue flat year over year, earnings down, and deliveries missing analyst estimates – once Trump was elected president, the stock went parabolic given Musk’s ties with Trump.

4) My for fun one was that my Golf Game was going to improve and I would break into the 70’s at my home course.. 

Well, I am happy to report that I was able to get my handicap down from a 15 at the beginning of the year to a 9.5.. with my best round of the year at WildWood being a 73!!! I honestly didn’t think I had a game like that in me..

SOOO ALL-in-All I was about 2/4… in 2024….. 

2025:

1) This is sort of a 2-in-1 here – I am predicting that Pierre Poilievre’s Conservative party is going to see a massive landslide victory in Canada’s 2025 Federal Election & will win a majority government. This will in-turn increase Foreign Direct Investment (FDI) in Canada in 2025. 

• Polls are signalling that Peirre is going to win (OBVIOUSLY THIS IS SUBJECT TO CHANGE).. especially considering today (at the time we are recording this podcast) Trudeau has stepped down from the leader of the Liberal party due to pressure. But I do think that it will be a decisive win for the conservatives.
• And given Pierre’s Positive business environment that he wants to promote – speeding up approvals to build oil refineries, liquefied natural gas plants, nuclear facilities and hydro power. I believe this will potentially lead to more Foreign Direct Investment and for it to remain above $15 Billion per quarter on average in 2025. If we look back from 1981-2024 FDI has averaged about $9 Billion per quarter. (USED TRADING EXONOMICS CHART).

2)“IF” Trump can end the Russia-Ukraine war it will take much longer than the 24-hours he announced and will not end until the second half of 2025 if he can in fact broker a deal. And while I really think the 24-hour comment was just the typical fiery comments from Trump –  I am predicting that IF he can stop the war “quickly” it will not end until the second half of 2025. Now I REALLY HOPE THIS PREDICTION IS WRONG and he can end it sooner than later with a good deal for Ukraine… but I think Putin will be tough at the negotiating table as his army continues to grind forward on the front lines and Ukraine will not roll over given Putin’s disregard for past cease fire agreements.

3) I predict that MicroStrategy will end the year below its current trading range of $380. So this is essentially a bet against Bitcoin for the year after its tremendous 2024 where it was up 125%, as well as the reduction of Microstrategy’s equity value premium to its bitcoin NAV. As Brett discussed on the podcast back in December of 2024 when he covered MicroStrategy, if we take the asset value of Bitcoin and strip off the debt we are seeing MicroStrategy’s stock trade at a premium to its Bitcoin NAV of approximately 2.5x.

4) Brennan gets a girlfriend in 2025 and Ryan will stop bugging him about it… 

• And here is the original picture…. And I wanted to point out that this is what Brett and Ryan would look like if they were in fact women.