Equity markets are navigating a mix of stretched valuations, softening consumer sentiment and uncertainty in the U.S. housing market, even as some major retailers post better-than-expected results. Investors are also awaiting Nvidia’s earnings, which could influence the broader artificial-intelligence trade into the fourth quarter.
BNN Bloomberg spoke with Denis Taillefer, portfolio manager at Caldwell Investment Management, who says the risk-reward profile in home-improvement stocks is improving, TJX continues to gain market share, and Metro’s discount to Loblaw may present opportunities despite near-term operational noise.
Key Takeaways
- Stretched valuations and soft consumer sentiment increase the risk of market pullbacks despite some recent strength in earnings.
- The U.S. housing slowdown and affordability issues remain headwinds for home-improvement retailers, though valuations are becoming more attractive.
- TJX continues to gain market share across demographics and deliver broad-based strength as a long-term compounder.
- Metro trades at a meaningful discount to Loblaw, and any near-term weakness tied to distribution-centre issues may offer entry points.
- Nvidia’s upcoming earnings could set the tone for artificial-intelligence stocks heading into the fourth quarter, where valuation risk remains elevated.
Read the full transcript below:
ANDREW: Investors didn’t love the latest quarter and commentary from Home Depot, but Lowe’s has been trading higher after profit in its latest quarter topped expectations, and same-store sales were positive for a second quarter in a row. TJX, as we already touched on, is also doing well — that stock trading near record highs. Let’s bring in Denis Taillefer, portfolio manager at Caldwell Investment Management. Denis, always great to see you. Thanks for joining us. Talk to us about Lowe’s. Is this a stock you’d be inclined to buy right now?
DENIS: Well, you know, it’s funny you say that. We don’t own it right now. We don’t own Home Depot. We haven’t been in that space for a while, but the risk-reward is starting to look a lot more interesting for that space. The stocks have been under pressure for the last few months — they’ve come off quite a bit. We think there are still some headwinds ahead of them: housing affordability, the whole U.S. housing market. Housing starts, especially for single-family homes, have been slowing down quite a bit. Consumer sentiment has been softening, so there are definitely some headwinds, and that’s been reflected in the stock price. But we also think this creates an opportunity to really start looking at that sector, because the risk-reward is starting to look much more appealing than it has over the last several months. So we’re not there yet, but we’re definitely doing some work to see if this is the right timing to take some exposure there.
ANDREW: It is a bet in part, obviously, on the U.S. housing market. Lower interest rates are generally good for housing, obviously.
DENIS: There’s definitely more of a macro event that we need to see happen to see these stocks start to rally again. They will rally ahead of that. But to your point, you probably need lower interest rates. You need to see the housing market pick up again. And then, as well, consumer confidence needs to start creeping up. So again, we’re saying these are all fairly depressed right now. You’ve got stocks trading at what we think are fairly attractive multiples. They’re very good businesses. Both Lowe’s and Home Depot are great businesses, very well run. They dominate that home-improvement market. So they’re definitely good businesses to invest in. And, like I said, we’re not there today, but we’re looking at the two names much more closely.
ANDREW: Another name, TJX — it’s been a favourite of investors because, of course, they offer off-price clothes sourced from other retailers, and that stock is near record highs. Would you be a buyer of TJX right now, Denis?
DENIS: Well, we own TJX right now, so we have a pretty good position in it. We’ve always liked the business. It’s such a good business model, and to your point, they offer really good brands across the board at really good value — and it’s everyday value, right? They basically offer you brands at 20 to 60 per cent discounts to what you would find in an apparel store, a branded store. So it’s a very good value proposition. They appeal to just about every income demographic. They’re getting a lot of market share within younger demographics as well, and they’re winning market share. If you look at this company, they’ve been a serial compounder. They’re growing quite a bit, mostly organically, because they’re winning market share from business models that simply aren’t as strong.
So we’ve always really liked the business model, and TJX is the best of breed in that space. They delivered again today. Across the board, all their metrics beat expectations in every market and segment. They’re delivering. It’s a really good business model. We still own it. We have it in our momentum fund, and as long as it keeps delivering, we’ll go along for the ride.
ANDREW: Metro reporting their numbers. They were plagued by the breakdown of that massive frozen distribution centre. It’s incredible, the scale this thing must operate at. You would prefer Metro right now over Loblaw?
DENIS: Yeah. Metro has always been considered the best of breed, so it’s always traded at a premium. Over the last few years, Loblaw has outperformed. I think Loblaw has been a little better positioned with its low-price stores. Metro has pretty good exposure there as well, but they are investing to open more stores at that lower price point for groceries. We still think they’re a quality company. They have a very strong bench and a very strong management team.
But today, they’re trading at a significant discount to Loblaw. I think Loblaw deserves that premium because they’ve been performing better and delivering over the last couple of years, but the discount is a little too deep right now. There’s still some noise to go through in Q1 with the issues they’ve had with the refrigeration system, so I think any sell-off in the next few quarters is probably an opportunity to get into Metro — or into that space — at a much better price point. The risk-reward right now favours Metro over Loblaw.
ANDREW: Let’s put up a one-year chart for Nvidia. It’s obviously off its highs. It’s so vast now — the company has almost become a kind of betting token on the future of AI. Would you be inclined to put money into Nvidia right now?
DENIS: If it comes off some more, it’s definitely on our radar. We have exposure to the whole AI trade — we just don’t have it through Nvidia. We’ve always felt like it’s a crowded trade, so we try to look for opportunities that aren’t so crowded, where fund flows can push those stocks higher. But we definitely pay very close attention to it. Their earnings are coming out tonight. We’ve had a really good Q3 earnings season, which sets up Q4 pretty well. The AI theme is still the main driver of the market, so all eyes are on Nvidia, and that will help set the tone for Q4. While we don’t own it — and I don’t know if we will in the near future — we do have exposure to the overall trade, and we’re paying very close attention because it will set the tone going forward.
ANDREW: What is your feeling on AI generally? You’re underweighting it? Because, you know, euphoria can push a group higher and higher.
DENIS: It certainly can. I’d say we’re probably underweight the overall theme because it’s such a big part of the index now, the S&P 500. But we still have a decent weight in the AI trade. That said, a lot of the companies we own have fairly stretched valuations, but their fundamentals are incredibly strong. Their backlogs are growing, and their earnings are growing year over year at a much faster clip than the rest of the market. So from that perspective, we’re fairly comfortable.
But valuations come with risk. Any hiccup in the story means valuation risk. So we’re paying very close attention. Nvidia’s earnings report tonight will really drive how we see things going into Q4. Any disappointment, and we’d expect a pullback in most of these names because valuation risk is elevated. So we’re very conscious of that. That’s why we’re underweight our overall exposure to AI — but we still have exposure, because we think we’re in the early innings of the AI build-out. Everything we’ve seen so far shows capital spending is still increasing year over year. We’re comfortable with the companies we own and their earnings profiles.
ANDREW: Thanks very much, Denis. Great hearing from you.
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This BNN Bloomberg summary and transcript of the Nov. 19, 2025 interview with Denis Taillefer are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
