Hap Sneddon's Top Picks: Dec. 18, 2018

Hap Sneddon , BNN Bloomberg

BNN Bloomberg

Dec 18, 2018

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Hap Sneddon, chief portfolio manager and founder of Castlemoore Inc.

Focus: Technical analysis and macro portfolio strategy

MARKET OUTLOOK

It seems like the dire wolf is at the doorstep again and bigger than during the earlier part of the year. Technical damage has occurred but some significant positives cannot be overlooked including indexes holding above the February and April lows, the U.S. dollar rolling over painfully slow, copper holding in and yields with indicators at extremes. We have seen sentiment become exceptionally washed out, whether it is measured by CBOE put/call ratios, investor surveys or the Fear and Greed Index. Even if we can build on a bounce or not markets are due for a bullish move over the course of the next few months.

TOP PICKS

ELI LILLY AND CO (LLY.N)   

In a down tape over the last few months Lilly has been making new highs. With the stock off over the last couple of weeks, still much less than the market, investors get a lower entry point into a premier healthcare stock. Today the company has its 2019 Guidance and Investment Community Meeting where I expect direction from the company to once again be conservative only to be followed by a beat. Healthcare is one of the few sectors in a secular bull market.

ISHARES CORE MSCI EMERGING MARKETS IMI INDEX ETF (XEC.TO)     

Emerging markets offer the best investor risk-to-reward on an index level. The primary drivers to a bullish upside are positive movements in the China-U.S. trade relations and concurrent weakness in the U.S. dollar. After falling to 2015-2016 levels, emerging markets do not only offer good value but also a conservative allocation in today’s environment with an initial one year upside of 25 per cent.  

TECK RESOURCES LTD (TECKb.TO)

Of course an investment in Teck is about global growth and a resolution to trade friction, but it’s much more than just that. Teck continues to trade at a discounted 4.5 times enterprise value at the 2019 estimated cash flow (EV/2019E CF) despite its strong free cash flow (FCF) generation (plus $1.9B), stable financial outlook and improved growth outlook in the copper business. With copper prices holding in well, the upside initial target off of a one year and 10 year base is exceptional.

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
LLY N N Y
XEC Y Y Y
TECKb N N Y

PAST PICKS: JAN. 3, 2018

ISHARES S&P/TSX GLOBAL BASE METALS INDEX ETF (XBM.TO)

  • Then: $14.90     
  • Now: $11.28      
  • Return: -24%     
  • Total return: -23%

SHOPIFY (SHOP.TO)

  • Then: $135.15   
  • Now: $180.41    
  • Return: 33%      
  • Total return: 33%

JP MORGAN CHASE & CO (JPM.N)

  • Then: $108.06   
  • Now: $100.64    
  • Return: -7%       
  • Total return: -5%

Total return average: 2%

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
XBM Y Y Y
SHOP N N Y
JPM N N Y

FUND PROFILE

Seasonal Advantage Portfolio

Performance as of Oct. 31, 2018

  • 1 month: -3.11% fund, -4.58% index
  • 3 month: -2.40% fund, -4.26% index
  • 6 Month: 2.92% fund, -0.39% index

 Index: Equal Weight of the S&P 500 Index, TSX Composite, and 10-Year U.S. Treasury Note

TOP 5 HOLDINGS AND WEIGHTINGS

Portfolio holdings and weightings as of October 31.

  1. BMO Dow Jones Industrial Average Hedged to CAD Index ETF: 30%
  2. VanEck Vectors Agribusiness ETF: 10%
  3. iShares NASDAQ 100 ETF(CAD-Hedged): 10%
  4. Cash: 8.5%
  5.  iShares U.S Insurance ETF: 8%

COMPANY TWITTER: @CastleMoore

PERSONAL TWITTER: @Hap_Sneddon

WEBSITE: www.castlemoore.com