Full episode: Market Call for Monday, April 15, 2019
Hap Sneddon, founder and chief portfolio manager at CastleMoore Inc.
Focus: Technical analysis
After a late fall/early winter swoon due to investor expectations for a lasting global growth slowdown, reduced earnings and the lack of a resolution to the U.S.-China trade friction, markets are rebounding after sensing the worst is over.
PMIs around the world stabilized in March after falling for 10 straight months, setting the stage for expansion in the second half of the year.
Currently, technology (chips and cloud), energy, base metals and emerging markets show strong relative performance and are favoured areas for the next three months.
A key to continuing mid-cycle growth (versus the late-cycle picture painted in the fall) is the U.S. dollar. A break higher in the DXY implies a return of the negative overhang from the aforementioned concerns. A strong pro-growth posture is preferred while also eyeing value levels for defensive areas of the market.
NUVISTA ENERGY LTD (NVA.TO)
Bought on June 18, 2018 at $9.40.
Nuvista is a very timely technical and seasonal security with a recent break out at $4.60. This Alberta-only oil and gas exploration and production company recently reported full 2018 results with financials in-line, reserves up 20 per cent and capital guidance unchanged. Street consensus is strong, matching CastleMoore’s first technical target of $6.40, then $8.55.
FREEPORT-MCMORAN INC (FCX.N)
Bought on Dec. 13, 2017 at $16.07.
This copper, molybdenum and gold producer is showing strong relative performance, one of the main criteria in our selection process. With no new copper coming on stream for several years, supply is expected to tighten further. Gold too has seen strength that is expected to continue, primarily from a weakening U.S. dollar (four year topping process), further supporting the robust technical picture. The recent break above $13 sets the stage for an advance to $16.
CGI GROUP INC (GIBa.TO)
Bought on Nov. 21, 2019 at $83.04.
After releasing first quarter results that showed a book-to-bill of 116 per cent, margin expansion (EBIT) of over 40 basis points and decent free cash flow of 6 per cent for 2019, the company recently announced an all-cash acquisition of Acando AB, a NASDAQ Stockholm-listed IT services company. This acquisition raises its global presences and lays the groundwork for sales expansion. Trading at all-time highs can be a challenge to forecasting technical targets. However, higher highs are in the cards, requiring only that investors show patience as the stock charts new price territories.
PAST PICKS: DEC. 18, 2018
ELI LILLY (LLY.N)
- Then: $106.50
- Now: $124.07
- Return: 16%
- Total return: 17%
ISHARES CORE MSCI EMERGING MARKETS IMI INDEX ETF (XEC.TO)
- Then: $25.13
- Now: $27.33
- Return: 9%
- Total return: 11%
TECK RESOURCES (TECKb.TO)
- Then: $29.14
- Now: $33.22
- Return: 14%
- Total return: 14%
Total return average: 14%