John Hood, portfolio manager, Croft Financial Group
FOCUS: ETFs
Top Picks: iShares Core S&P/TSX Capped Composite Index ETF, BMO Covered Call Canadian Banks ETF, Vanguard US Dividend Appreciation Index ETF
MARKET OUTLOOK:
Given the collapse of Prime Minister Trudeau’s government and the inauguration of U.S. president-elect Donald Trump in the next 10 days, I am uncertain whether I have an outlook or simply a guess. As a result, I’m going to hedge my recommendations by suggesting that investors wait a couple of weeks before adding to existing equities. I don’t believe that any rushed change of leadership will save the Liberals. Among front runners, Dominic Le Blanc has already declined, Mark Carney has never accepted and without any political experience could be another Michael Ignatieff disaster. Chrystia Freeland has been a close confidant and fellow conspirator with Trudeau on his slapstick economic policies and unlikely to cast off the Trudeau shroud. Nevertheless, I do expect Pierre Poilievre to initiate policies that will restore Canadian competitiveness and economic growth, so for the first time in years, I am recommending Canadian equities.
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TOP PICKS:
iShares Core S&P/TSX Capped Composite Index ETF (XIC TSX)
Bought at $39.94
I have owned units of XIC and XIU since inception in 2001 but traded in and out. Holds 224 stocks, financials 33 per cent energy 17 per cent Mers low 0.06 per cent. Price to earnings ratio (P/E) 19, price to book ratio (P/B) 2.2, a yield 2.42. Options available for covered calls. Held in some legacy accounts but not bought recently in client nor personal accounts.
BMO Covered Call Canadian Banks ETF (ZWB TSX)
Bought at $19.95
ZWM has been a core income enhancing ETF, but I sold our ZWB last fall with the TD fiasco over money laundering and feared a contagion with other banks. That didn’t happen and the distribution yield of 6.6 looks very attractive with falling rates. Unfortunately, the MERS on this is high at 0.71 which is too high for an ETF with just six holdings, but most other covered call ETFs use leverage.
Vanguard US Dividend Appreciation Index ETF (VGG TSX)
Bought at $95.80.
Holds 338 stocks in S&P 500 Index which increase dividends. P/E 26.7 P/B 4.9 times so not cheap APPL/MSFT/Visa/Master/Home Depot but not so focused on Magnificent Seven.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| XIC | N | N | Y |
| ZWB | N | N | N |
| VGG | N | Y | Y |
PAST PICKS : February 20, 2024
Invesco S and P MidCap Quality ETF (XMHQ NYSEARCA)
- Then: US$97.84
- Now: US$98.21
- Return: 0.3%
- Total Return: 6%
Invesco S&P 500 Equal Weight Index ETF (EQL TSX)
- Then: $32.81
- Now: $38.07
- Return: 16%
- Total Return: 18%
Horizons 0-3 Month T-Bill ETF (CBIL TSX)
- Then: $50.10
- Now: $50.04
- Return: -0.1%
- Total Return: 4%
Total Return Average: 9%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| XMHQ | N | Y | Y |
| EQL | N | N | N |
| CBIL | Y | Y | Y |