John Hood’s Top Picks for June 13, 2025

John Hood, Portfolio Manager, Croft Financial Group

Focus: ETFs

Top picks: Global X Defense Tech, Vanguard Dividend Appreciation Index Fund ETF and BMO US High Dividend Covered Call Units

MARKET OUTLOOK:

Given U.S. President Donald Trump’s mercurial nature and his “shock and awe” tactics for trade negotiations on “Liberation Day”, analysts, investors, business leaders, including Trump’s inner circle, don’t know what haphazard scheme he is going to come up with next. It doesn’t matter how much time CFAs review 10K earnings reports or how much “quants” tickle their algorithms, the chaos that Trump thrives on and which creates market volatility will likely continue. In other words, everyone is just guessing at what markets or Trump will do.

This makes it even more important that each investor have his or her own strategy for dealing with volatility. I have said many times on BNN--I don’t know what the market is going to do but I know what I’m going to do and how I’m going to respond to market conditions. This is what each investor needs to know for themselves, and you start by looking at your asset allocation. The typical portfolio is 60 per cent equities and 40 per cent fixed income. If you can tolerate a 20 to 30 per cent downturn in equities over the next 12 to18 months then consider adding to your equities, but if you can’t’ because you are currently retired, then you need to look at increasing the amount of fixed income. This also means having the presence of mind that when markets decline and, provided you have good quality equities, to buy when the market is down and not chasing the market up because of fear of missing out (FOMO), otherwise you are making the classic mistake of selling low and buying high.

Nevertheless, I have not reduced my U.S. equity holdings, but I have added positions in a combined European and U.S. defense ETF. In Canada, although both surprised and pleased to see PM Carney’s commitment to increase defense expenditures, I do not believe that he will surrender his climate change alarmism and proceed to build pipelines across the country which Canada needs. As a result, I have retained but not added to Canadian positions. But this could change if Bill C-69, the anti pipeline bill, is repealed or if Stephen Guilbeault is booted from cabinet.

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TOP PICKS:

Global X Defense Tech ETF (SHLD NYSEARCA)

This ETF is about weapons and does not include airliners like Boeing and airbus (no ESG here). It is a mix of US aircraft and missiles (General Dynamics, Patriots, Stingers, and Javelins and Lockheed Martin), UK BAS artillery, German Rheinmetall leopard tanks and Italian Leonardo Navy. I Initially bought it in April at US44 per share. It is now 58. I continuing to buy because most stocks have drone components (see Ukraine attack on Rus strategic bombers) and Europe needs increase up to five per cent of GDP on defense. Palantir is large holding with extremely high P/E but has AI contracts in US military.

Vanguard Dividend Appreciation Index Fund ETF (VIG NYSEARCA)

US equities that grow their dividends; 338 holdings; MSFT/JPM/Visa/ Exxon/Walmart yield 1.45 Diversification away from Mag 7 and other techs. The dividend treated as income plus possible US including tax.

BMO US High Dividend Covered Call Units ETF (ZWH TSX)

The MER.75 yields 6.7%. It has 35 holdings with Coke, P&G, MSFT, PFE and HD. JPM Takes advantage of higher US option prices. My preferred strategy with covered calls is with stable dividend payers.

PAST PICKS: June 25, 2024

TD U.S. Equity Index ETF (TPU TSX)

Then: $42.24

Now: $46.61

Return: 10%

Total Return: 12%

Industrial Select Sector SPDR Fund (XLI NYSEARCA)

Then: US$122.02

Now: US$143.16

Return: 17%

Total Return: 19%

Global X 0-3 Month T-Bill ETF (CBIL TSX)

Then: $50.11

Now: $50.05

Return: -0.12%

Total Return: 3%

Total Return Average: 11%