Full episode: Market Call for Friday, March 27, 2020
Jaime Carrasco, portfolio manager at Canaccord Genuity
Focus: Precious metals and North American dividend stocks
I think it’s important to point out that, barring the volatility, gold is rising right along with systemic risk and it’s price continues to hold.
Furthermore, I think this strength is also based on the reality that we are financially Ill-prepared for this global emergency and the need for governments and central banks to stimulate in order to keep up with this unfolding mess. Considering that we were already at the zero bound, these policies will only take us into further negative real rates. Therefore, I continue to advice that clients have a minimum allocation to the one sector that is offering positive earnings correlation to rising systemic risk.
In the portfolios we continue to maintain high levels of cash, having recently decreased our minimum allocation to all sectors except precious metals, which we have now raised to 30 per cent in the Equity Income portfolio. Regardless of the current share price of these assets, I think the herd will soon recognize that their earnings will only increase from here. Adding at these historically cheap levels would confirm the great Monty Gordon’s number 1 rule of trading: “There’s no money to be made when everybody gets it.” I’m speculating they will.
As for the overall markets I’ll observe caution and continue to maintain high levels of cash until the situation is contained. Furthermore, considering the high levels of debt in the system, I would question how long it can last without cash flow before it is pushed over the edge, which would makes a complete debt reset a probability of outcome.
On a historical note I find it rewarding that history is proving itself. While the price does not currently reflect it, the earnings of the producers are rising in bad times. Hedge accordingly and follow the yellow brick road to safety.
ALAMOS GOLD (AGI TSX)
We have a buy rating with an $11.50 target.
OSISKO ROYALTY (OR TSX)
We have a buy rating with a $17.00 target.
FORTUNA SILVER (FVI TSX)
We have a buy rating with a $6.50 target.
PAST PICKS: MARCH 15, 2019
NORTH AMERICAN PALLADIUM (PDL TSX)
Acquired by Impala Platinum Holdings on Dec. 17.
- Then: $17.51
- Now: $19.73
- Return: 13%
- Total return: 17%
KIRKLAND LAKE GOLD (KL TSX)
- Then: $44.59
- Now: $44.08
- Return: -1%
- Total return: -1%
VALENS GROWORKS (VLNS TSXV)
- Then: $3.03
- Now: $2.29
- Return: -24%
- Total return: 24%
Total return average: -3%