May 21, 2026, Issue 26

How Life Contantly Evolves

Well ladies and gentlemen, it has been 57 days since this dad has posted a newsletter, but who’s counting? With apologies as the old saying goes, sometimes life gets in the way of what we really want to do. Some interesting events have taken place during these last few weeks.
First and foremost, your humble writer turned the big 6-0!! Turning 60 means a lot of things. I feel my mortality more for sure, but feel lucky to be in good enough shape to run a 10K in just under an hour. That also happened over the course of my hiatus. Being able to participate in these types of events with the kids is not something to take for granted. Kudos to a daughter and future son in law who finished a half marathon and a 5K respectively in fantastic times. I would be remiss if I also did not mention the good fortune that both Mrs. Dadsadvice and I still have healthy parents roaming the earth at this stage. Many are not so fortunate.
The other big life moment that has happened is that after 18+ years with Hanes Industries, I handed in my resignation. Without getting too far into any specifics, I will say this as a piece of advice to young entrepreneurs and business people: You can print the word “President” on your business cards, but that doesn’t make you a leader. I feel very proud of the legacy I leave behind, rebuilding the Canadian market, and launching the Medical division. I am excited about what comes next, and I will keep y’all informed at the right moment.
With all of that said, let’s take a look at world events and the market over the last couple of months.

The World Today

The war with Iran that supposed to last “a few weeks” continues, albeit in a ceasefire holding pattern. The issues here have become crystal clear. The Strait of Hormuz is effectively closed, save for a trickle of tankers that agree to pay the toll to Iran. This has now directly affected all of us. The most obvious blow hit us in the gas tank. The average price of a gallon of gas in the USA is roughly $4.50. Prior to the war it sat around $2.75. Canadian prices have risen as well, although not as dramatically. The average price in Canada of about $1.89 per liter translates to $5.20 per gallon USD. Bottom line is that filling our cars hits our bottom line! Unfortunately, the consequences of the war action is felt in many other areas. Groceries and food, travel and flights, plastics and packaging, as well as farming equipment and fertilizer have all seen jumps in cost. And before you say who cares about the cost of fertilizer, think about that when you go pick up some tomatoes and see the price.
Somehow through this war and the continued turmoil in Russia/Ukraine, threats against Cuba, terrorist threats around the world at all time highs, and the aforementioned inflation hitting the entire globe, the stock market has remained not only strong, but on its seemingly never ending march upward.
One last, but certainly not least event over the last 57 days. My beloved Montreal Canadiens have battled their way through two tough 7 games series to the Eastern Conference Finals. Unfortunately, they are up against my beloved Carolina Hurricanes. To be fair, the Habs are my number 1 after all the years spent there. But either way, it’s win-win!!

A Look at the Market

Through two months of war, we would have expected the stock market to get beaten down, potentially to record low levels. In fact, markets are at or near all-time highs. How is this possible? The easy answer is earnings. With most companies having just reported their first quarter results we can see the how the numbers look. The S&P 500 are a good representation of the largest companies in the USA. Their first three months of the year have shown bottom line earnings that are roughly 28% better than last year’s equivalent quarter. Top line sales have grown by 11%, with 80% of companies beating revenue expectations. 84% of these companies have reported earnings above what the “experts” were expecting. The result of all these statistics? Higher stock prices and a market that continues to rise.

Some Companies

One of the companies that everyone looks at as a harbinger of the market as a whole and the AI buildout in particular is Nvidia. With their first quarter in the books, a quick look at the number tells us why they lead the way. For those unaware, NVDA makes the chips and processors that power AI companies like OpenAI and Anthropic among many others. They just reported $81.6B in revenue, which was 85% higher than their sales a year ago. Let that sink in. Bottom line was $1.87 per share versus last year’s earnings of $0.96c per share. For a company this size to grow sales and earnings by a factor of nearly 2x is nothing short of astounding. It speaks to the wide (and somewhat scary) proliferation of AI as well as the state of the market where companies involved in AI are basically printing money. Although NVDA is seeing competition come into their space, we will continue to hold.
SNAP is one of the firms that has disappointed on earnings. With SNAP this is a case of yet again not hitting expectations. While the results were not completely terrible (revenue up, EBITDA up, Net Loss less than expected), the outlook was flat and the deal with Perplexity that was to add $400M in sales has been cancelled. This was a key to our investment thesis. With all of this in mind, we took the decision to sell half of our position at $5.98 per share. On the bright side, we hold a tax loss. On the other hand, we still keep half the shares and hope for better results or a buyout going forward.
Peloton announced results that were better than expected. Top line sales were up slightly to $631M. Subscribers did not recede as some were worried about after the price increase. In fact subscription revenue grew 2% to $428M. For me, the more important numbers are in net profitability with $126M in EBITDA and $151M in free cash flow. Beyond that the company is sitting on $1.13B in cash with net debt reduced by 70%. The new CEO continues to clean up the balance sheet while getting new products to market. The line of more durable machines for gyms and public spaces (hotels, offices) will be released later this year. I anticipate a comapny like Planet Fitness with their 3,000 gyms to begin ordering Peloton units. I’ve added to this position and it currently is one of our largest. We hold and expect better results ongoing.
More thoughts on more companies in the next issue. I promise that will come sooner than 57 days from now! As always, let me know if there are companies you would like information or opinion on.

Thought of the Day

There is a very old saying that people make their plans and God laughs. It means that the road we are on will always have some twists and turns that take us to unexpected places. 10 years ago if you would have told me that I would be sitting in Hickory, NC listening to country music, and ejoying a bourbon I would not have believed it. Once it happened, I would have planned to work and eventually retire from Hanes Industries. But the road turned yet again, and at the age of 60 I now find myself excited, happy, and a little nervous to be starting a new position. Just another example of why we can only keep looking forward!!

Always looking forward to your comments.