Gordon Reid, president & CEO of Goodreid Investment Counsel

FOCUS: U.S. equities

MARKET OUTLOOK:

While U.S. equity markets are in a sideways pattern, there are undercurrents that are important to understand to allow for outperformance. Value stocks have twice the return of growth issues this year but are starting to wane in recent weeks. At Goodreid, this price action gives us confidence that our barbell approach is not only prudent but also will yield superior results. We believe that more cyclically oriented stocks have more room to grow but would not be surprised to see growth dominate for a period.

The market appears to be buying into the Fed’s thesis that inflation trends are transitory. In fact, while the headline inflationary numbers are alarming, a little digging exposes the temporary nature of many of these inflationary trends. An example is the rapid rise in car rental rates, which anybody who follows the car industry knows is the result of supply disruptions due to temporary chip shortages.

Meme stocks are dominating much of the market action these days. The buying (and selling) power of a motivated and unified group that bands together on social media sites such as Reddit is impressive but can also be dangerous. The loudest voice isn’t always the best one to listen to. Most of these stocks are trading on 100 per cent sentiment, driven up and down by sometimes billions of dollars. This is not investing, rather it’s straight up gambling. Most of these issues lack the fundamental strength to support even a fraction of their trading price. You don’t want to be without a chair when the music stops.

TOP PICKS:

Bank of America (BAC NYSE) Latest Purchase June 2021 @ US$43

Bank of America will benefit in a variety of environments. It is extremely well positioned to profit from rising interest rates, but a lower rate environment will likely bring with it more loan growth and strong investment and capital markets businesses.

Masonite (DOOR NYSE) Latest Purchase April 2021 @ $126

Masonite is a leading worldwide manufacturer of interior and exterior doors, having last year achieved sales of 31 million doors in 60 countries. Margins and profitability are poised to accelerate rapidly on the back of a very strong housing market and a restructured business.

Toll Brothers (TOL NYSE) Latest Purchase April 2021 @ $59

Toll Brothers is a luxury homebuilder that is capitalizing on a surge of activity. New home orders and backlog bode well for the industry and as confidence rises Toll Brothers will benefit from the “move up” buyer. Positive demographics, low mortgage rates and a desire to move to suburban living should provide a tailwind for the company and the stock for many years.

PAST PICKS: June 17, 2020

JPMorgan Chase & Co. (JPM NYSE)

• Then: $99.48
• Now: $154.88
• Return: 56%
• Total Return: 61%

Piper Sandler Companies (PIPR NYSE)

• Then: $61.68
• Now: $127.71
• Return: 107%
• Total Return: 113%

Raytheon (RTX NYSE)

• Then: $66.90
• Now: $89.31
• Return: 33%
• Total Return: 37%

Total Return Average: 70%

Company Website: www.goodreid.com