Keith Richards, President and Chief Portfolio Manager, ValueTrend Wealth Management
Focus: Technical analysis
Top picks: NorthWest Healthcare REIT, Tourmaline Oil, Weatherford
MARKET OUTLOOK:
Nobody knows what the market will do. However, one can measure the relative risk vs return, and take that into consideration when managing your portfolio. I’m looking at the odds of a market pullback as higher than normal over the coming few months. Here’s why, and what ValueTrend is doing about it:
Four reasons why we see higher potential volatility ahead:
Seasonals: From August to the end of October, seasonals are usually choppy (not necessarily negative),for the TSX and SPX. That, and the VIX has its 3 biggest months meaning high volatility is possible.
High valuations: I normally don’t talk fundamentals, but…cape recently hit 39, putting it at the second highest level in history.
Leverage: For the first time ever, margin debt topped US$1 trillion and has ballooned over 25 per cent over the past year. Fully one-fifth of the leverage in the stock market has been built up just in the past year alone.
Fear of missing out: Portfolio managers are chasing the rally and putting nearly all their money to work, with cash ratios having been driven down to record lows of just 1.4 per cent. I’ve noted when managers were too exposed to the markets, this can result in sharp corrections.
Bad breadth: Top 10 stocks represent 40 per cent of S&P market cap. Literally all sectors except technology & communications have been underperforming the SPX, meaning that it’s a “one trick pony” market
The 4 Cs to invest in a potentially volatile market:
Cash: I think it’s a good idea to hold some cash to reduce risk and increase odds of opportunistic buying
Commodities: hold hard assets, including precious metals
Countries (outside of North America)— Emerging markets, European Union, Eastern nations, Japan, Asia, India, etc.
Currency: The U.S. dollar looks attractive here.
Contrarian: We are buying value, low beta, under loved/overlooked stocks.
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TOP PICKS:
NorthWest Healthcare REIT (NWH-U TSX)
Tourmaline Oil (TOU TSX)
Weatherford (WFRD NASD)
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| NWH-U TSX | Y | Y | Y |
| TOU TSX | Y | Y | Y |
| WFRD NASD | Y | Y | Y |
PAST PICKS: JUNE 24, 2024
ARC Resources (ARX TSX)
Then: $29.69
Now: $26.52
Return: -11%
Total Return: -10%
Global X Silver Miners ETF (SIL NYSEARCA)
Then: US$47.20
Now: US$54.72
Return: 16%
Total Return: 16%
CASH (CASH TSX)
Then: $50.07
Now: $50.08Return: 0.02%
Total Return: 0.44%
Total Return Average: 2%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ARX TSX | Y | Y | Y |
| SIL U | Y | Y | Y |
| CASH TSX | Y | Y | Y |
