In this edition of Market Factors I use merger and acquisition activity in cybersecurity to sheepishly recount the two biggest mistakes of my investing career. In a later section, we\u2019ll describe how a widespread short squeeze is affecting markets and the diversion judges high school movies. <\/p>\n
Open this photo in gallery:<\/a><\/p>\n Graeme Roy\/The Canadian Press<\/p>\n RegretsTwo investment decisions taught me lessons but still cause me pain<\/p>\n There is a news story today that brings up painful memories. I am generally good at looking ahead, not backwards, when investing and not regretting previous transactions. There are two decisions, however – one stock I didn\u2019t buy and one I did – that I can\u2019t get over. <\/p>\n Not buying cybersecurity specialist Palo Alto Networks is one of the lamentable calls. The company agreed to acquire CyberArk Software Ltd. for US$25-billion, a 26 per cent premium to Tuesday\u2019s close. CyberArk specializes in identity security tools.<\/p>\n Palo Alto\u2019s total market cap was well below US$25-billion when I was considering buying the stock in mid-2014 – it was US$4-billion. Palo Alto\u2019s market cap is now US$129-billion and its stock is up 1,729 per cent since April 30, 2014.<\/p>\n I was correct in my assumption that cybersecurity would become a major issue as corporate networks grew in scale. It seems ludicrous now, but I didn\u2019t like the way the stock price was acting in 2014. Volatility was low and it seemed like a \u2018two steps forward, one step back\u2019 situation with no momentum. <\/p>\n I stopped following it closely and by the time I turned around it had doubled. Again ludicrously, I thought I\u2019d missed the move. <\/p>\n My other regrettable error, buying telecom equipment provider Juniper Networks, was caused by straight naivete. Wireless data traffic was doubling every two years and I was sure the advent of 3G and 4G would require vast capital expenditure on switches, routers and other telecom equipment. <\/p>\n Had I known what I was doing, or even asked the telecom analyst where I was working, I would have known that the over-investment during the 1990s and early 2000s had created massive excess capacity. It would take years and years for data traffic to fill the previously built networks. Not much equipment buying would be necessary. <\/p>\n In hindsight, American Tower Corp. was the right way to play the rise of wireless. The provider of the eyesores that relay wireless signals (I might be a bit bitter) saw its stock increase by 1333.7 per cent for the 20 years beginning June 30, 2005 (a relatively random start date but from memory it\u2019s close to when I bought the stock). Juniper was up 107.4 per cent. Researching those numbers caused me physical pain. <\/p>\n In true rookie fashion, I compounded my mistake by holding Juniper too long. I thought if I just held it long enough my genius growth thesis would play out. It was here that I learned not to let ego get anywhere near buying and selling decisions.<\/p>\n I reiterate that I\u2019m usually good at avoiding \u2018could have, would have, should have\u2019 with old investment decisions but these two still bug me. Thankfully both situations taught me valuable lessons that I still apply today. <\/p>\n EquitiesShort squeeze pushing markets higher<\/p>\n Morgan Stanley Wealth Management chief investment officer Lisa Shalett expressed her bearishness in a way that explained some underlying trends in global markets. <\/p>\n Ms. Shalett is bearish because of her perception of investor complacency. <\/p>\n She notes that investors are now blindly buying the dip despite rich valuations. In addition, the readily available cash that could take the market higher, in money market funds for example, has fallen to year 2000 lows. <\/p>\n Everybody\u2019s already in. <\/p>\n The strategist also highlights the extremes of market concentration. <\/p>\n Ms. Shalett notes that speculative sectors of the market are beginning to lead. Specifically, systematic and algorithmic-driven funds have added risk automatically as volatility indexes have declined. This re-risking has caused a wide-reaching short squeeze that has driven Bespoke Investment Group\u2019s index of most shorted stocks higher by 80 per cent from the April 9 low. <\/p>\n Ms. Shalett recommends stock-specific investment strategies including long\/short funds and individual U.S. stocks in the tech hardware, industrials, financials and energy sectors with upside surprise potential. <\/p>\n Open this photo in gallery:<\/a><\/p>\n Say Anything (1989), Cameron Crowe\u2019s directorial debut, is all heart. A boyish John Cusack plays the affable teen slacker Lloyd, who somehow lucks into a relationship with Diane (Ione Skye), the prettiest and smartest girl in his high school.<\/p>\n DiversionsMy selections for best high school movie are correct<\/p>\n An office discussion made clear that a lot of people\u2019s selection of a favourite high school movie taps into the intense emotions of high school itself, even decades later. My favourites are, of course, the best picks. <\/p>\n Say Anything is one of the two best high school movies ever made and this is a hill I will happily perish on. Peak John Cusack, before he went a bit loopy on social media, masterful nostalgia mining by writer and director Cameron Crowe and a terrifically nuanced performance from Ione Skye made this one tremendous. And Frasier\u2019s dad, he was great too. <\/p>\n Spectacular Now<\/a> is more recent and less known but it is my second (correct) pick as best high school movie. Star-making performances from Miles Teller and Shailene Woodley are the primary attractions here along with an oily turn by Kyle Chandler as Teller\u2019s deadbeat dad. I intend to name my next dog after this movie\u2019s main character. <\/p>\n Any number of John Hughes movies are acceptable choices as best high school movie, including the more obscure Some Kind of Wonderful which had an amazing soundtrack. I liked Perks of Being a Wallflower a lot too. <\/p>\n Two movies that were suggested to me in the category were I Know What You Did Last Summer and 10 Things I Hate About You but I have grievances with both. <\/p>\n Let me know your favourites by email here<\/a> and I promise to not be too critical. <\/p>\n The essentials<\/p>\n Looking for our updates on market movers, analyst actions, stock technicals, insider trades and other daily, weekly and monthly insight? Click here<\/a> to visit our Inside the Market page.<\/p>\n Globe Investor highlights<\/p>\n Jamie McGeever details how retail investors have been the key drivers<\/a> of the latest equity market rally<\/p>\n Larry MacDonald reports on the latest short positions<\/a> on the TSX<\/p>\n Bond investors are warming up<\/a> to risk again. Meanwhile, the U.S. dollar is shedding<\/a> its tariff risk premium<\/p>\n What\u2019s up next<\/p>\n The Bank of Canada has already announced no change to interest rates and two-year bond yields fell four basis points in the aftermath. Month-over-month GDP for May on Thursday is the other important release. It is expected to show a mild contraction of 0.1 per cent.<\/p>\n Important earnings announcements are far more plentiful. On Thursday we\u2019ll get Gildan Activewear Inc. (US$0.955 per share expected), TC Energy Corp (C$0.783), Cenovus Energy Inc. (C$0.137), Cameco Corp (C0.469) and Brookfield Infrastructure Partners (US$0.217). <\/p>\n Friday will see profit reports from Enbridge Inc. (C$0.579), Fortis Inc. (C$0.701), Imperial Oil Ltd. (C$1.647) and Telus Corp. (C0.2323). Suncor Energy Inc. (C$0.710) posts results next Tuesday and the next day Shopify Inc. (US$0.29), Brookfield Asset Management Ltd. (US$0.391) and Manulife Financial Corp (C$0.966) will announce earnings. <\/p>\n Friday is the big day for U.S. economic news as non-farm payroll growth for July (107,000 new jobs expected) and ISM manufacturing (49.5) are released. Month over month personal spending for June (0.4 per cent) comes out a day earlier and final durable goods orders for June will be released on August 4th. <\/p>\n For U.S. earnings there\u2019s Bristol Myers Squibb Co. ($1.073), Baxter International Inc. ($0.611), Paramount Global ($0.347, analyst questions might be entertaining here) and Stryker Corp ($3.071) on Thursday. Exxon Mobil Corp ($1.556) and Colgate Palmolive Co. ($0.897) report Friday and Berkshire Hathaway Inc. ($7514.743) are out on Monday. <\/p>\n