Full episode: Market Call for Friday, October 18, 2019
Hap Sneddon, chief portfolio manager and founder of Castlemoore
Focus: Technical analysis
The start of the fourth quarter traditionally sees bond yields peak and markets move past their danger period as the strongest part of the investment year begins. To this point, we have in fact seen a relative improvement in the cyclical areas while also a weakening in the defensives, with the major stock indexes and commodities rising and bonds falling in our asset class rankings.
With earnings expectations taken down so much and sentiment bearish, markets are set up for potential positive surprises as we close out 2019. This favours a slight shift in allocation to Canadian, European and Asian markets over the U.S.
NATIONAL BANK (NA:CT)
Latest purchase on Oct. 11, 2019 at $66.51.
The quietest yet technically strongest of the Big Six Canadian banks recently broke out of a two-year price trading range. Its earnings release was as expected, with positive improvements in bank “efficiency” and underwhelming market expectations on wealth management (a surprise?) being the key takeaways. One of the most important investment measurements we look at, strength versus the S&P500, has also broken out of a two-year slump (the TSX too).
TECK RESOURCES (TECK/B:CT)
Latest purchase on Oct. 10, 2019 at $21.022
Teck is a low-risk call, both technically and fundamentally, on improving global trade and company-specific metrics. How and when global trade rights itself is hard to handicap, but in the meantime Teck offers compelling valuation from operational improvements, limited ability for peers to scale up copper production and long-term return of capital. A weekly break below $19.25 triggers a sell and an answer to whether the pro-cyclical move catches or not.
Latest purchase July 30, 2019 at $115.69.
Zoetis is the world’s largest maker of medicine for livestock and pets and now a fully independent spin-off from Pfizer. The company will see strong double-digit earnings, revenue growth and an improving cost structure. It has a bright future from its pipeline (300 R&D projects underway) and acquisition program. Technically the stock is a near-perfect picture, with a strong long-term trend in effect and near-term buy signals triggered.
PAST PICKS: MAY 6, 2019
ISHARES NASDAQ BIOTECHNOLOGY ETF (IBB:UW)
- Then: $108.83
- Now: $102.38
- Return: -6%
- Total return: -6%
ENERPLUS CORP (ERF:CT)
- Then: $11.67
- Now: $8.26
- Return: -29%
- Total return: -29%
- Then: $95.51
- Now: $121.84
- Return: 28%
- Total return: 28%
Total return average: -2%