This edition of Market Factors starts with the biggest new trend in electrical power and why one stock rose over 200 per cent as a result. Section two describes the self-defeating structure of asset management and the diversion looks to Germany for espionage drama.
KR Sridhar, CEO of Bloom Energy, gives thumbs-up on the day he rings the opening bell at the New York Stock Exchange on Sept. 29, 2026.Jeenah Moon/Reuters
Growth stocks
Bring your own power
Data centre expansion is stretching a U.S. power grid that was already struggling to meet demand and Behind the Meter (BTM) power – generators on sites that are not connected to the grid – is the sweeping new trend, one with clear winners and clear investment opportunities.
The rapid buildout of data centres is not a new story but a change within that trend is less understood. AI providers are now finding it necessary to build smaller facilities close to end markets instead of connecting all cities to massive centres in faraway locations. (Large centres are used to train AI agents and smaller centres for actual use of the agents). This requires local power supplies and this is increasingly provided by BTM equipment.
Morgan Stanley analysts estimate a US$240-billion opportunity in BTM power (or roughly 120 gigawatts, the equivalent of powering 100 million average homes). They see three big winners from the trend – Bloom Energy Corp. (BE-N), BorgWarner Inc. (BWA-N) and FTAI Aviation Ltd. (FTAI-Q).
Bloom Energy provides solid oxide fuel cells that are ideal for BTM power because of DC current output, low noise and emissions. The stock is up 239 per cent over the past 12 months (that’s not a typo). The trailing price to earnings ratio is really high at 251 times but earnings are more than doubling every year.
BorgWarner produces turbine generators that are also prevalent in local AI infrastructure. The stock is far more reasonably valued at 11.5 times trailing earnings and has climbed 47 per cent over the past tear.
FTAI sells jet engine-based gas turbines, a thing I didn’t know existed before now. The trailing price earnings ratio is 36 and the stock has returned an uninspiring 1.6 per cent for the past 12 months.
Asset management
How not to manage money
Long-time Wall Street Journal columnist Jason Zweig published an article that is ostensibly about Warren Buffett The Unicorn but really gets into detail about how not to build an asset management firm.
Mr. Buffett’s early investment success was followed with a structure at Berkshire Hathaway that allowed him to continue winning for investors. Mr. Zweig emphasized the importance of this accomplishment by describing ways that fund managers prevent themselves from outperforming.
High management fees, portfolio churn, massive staffs, leverage, short-term thinking, emphasizing assets under management instead of after-tax returns for clients, and pro-cyclicality (leveraging short-term market trends at the expense of risk management) are the self-destructive trends mentioned by Mr. Zweig. They also describe most fund companies.
Then German Interior Secretary of State August Hanning attends a press point in Rabat on July 3, 2007.ABDELHAK SENNA,-/AFP/Getty Images
Diversions
German skullduggery
Don’t look now but there’s interesting news out of Germany, notably treason accusations against the former head of the country’s spy agency. August Hanning, who formerly led the Bundesnachrichtendienst national intelligence agency, was arrested at his home Tuesday morning and charged with forwarding sensitive information to non-allies through his consulting agency.
Mr. Hanning was privy to briefings from MI6, the CIA and other intelligence services so they are up in arms and wondering who knows what now. All that is publicly known about the recipients of the illicit information is that they are not Russian.
Mr. Hanning’s primary assistant was also arrested although authorities are not naming him directly, referring to him as Manfred D. to protect his identity.
The timing of the arrest is a bit suspicious. Current chancellor Friedrich Merz is trying to ram through legislation granting a host of new powers to the national intelligence service. Did someone plan the arrests to cast doubt on the agency’s competence?
Stories like this from the more mercurial French wouldn’t have surprised me but I find the thought of Germans being anything but blunt, direct and honest amusing.
Speaking of French spies, the TV series Le Bureau des Légendes is terrific. There’s also a U.S. remake called The Agency which isn’t quite as good but still compelling.
The essentials
Looking for our updates on market movers, analyst actions, stock technicals, insider trades and other daily, weekly and monthly insight? Click here to visit our Inside the Market page.
Globe Investor highlights
Economist David Rosenberg believes baby boomers have put themselves at great risk by heavily weighting stocks in their portfolios right now
Dr. George Athanassakos on some eerie market parallels to the start of the Great Depression
Jamie McGeever on why a sharp move higher in the so-called term premium in bond markets is sending a dangerous signal for stocks
What investors need to know as autocallable ETFs arrive in Canada
Atul Tiwari, the founding president of BMO ETFs, on what has him concerned with the proliferation of exchange-traded funds in Canada
Quick hits
BofA Securities analyst Vivek Arya initiated coverage on the biggest quantum computing pure play by revenue – IonQ Inc. (IONQ-N) – with a US$60 12-month price target. Mr. Arya expects that quantum computing will be viable for corporate use by 2030 and that revenue for IonQ will rise from near zero to US$2.5-billion annually in three years. IonQ currently trades near US$42.
Cenovus Energy Inc. continued its consolidation of the oil sands with the purchase of Athabasca Oil at a 13 percent premium to Friday’s closing price. The latter currently produces 45 million barrels of oil equivalent per day and but promising properties make 115 million barrels per day possible. Cenovus acquired MEG Energy last year. Scotiabank analyst Chris MacCulloch also believes Cenovus’s technology can improve efficiency at Athabasca’s current producing sites.
Economist Edward Yardeni has invented his own acronym – FEMO, for Fabulous Earnings Momentum – to explain the equity market’s resilience. Mr. Yardeni is sticking with his bullish Roaring 2020s forecast with the expectation that new technology will create a productivity boom just as it did 100 years ago. Consensus earnings forecasts point to 15 per cent annual earnings growth for the S&P 500 for this year and next.
Read this week’s earnings and economic calendar here
