Jason Del Vicario, portfolio manager at HollisWealth
Focus: North American growth stocks

MARKET OUTLOOK

We find ourselves back in unprecedented times. Back in January we warned that our signals were pointing to heightened recession risks (namely, the yield curve inverted in summer 2019). At the time no one knew that a virus outbreak would enhance the downturn in the economy. Note that I don’t say “tip” or “cause,” as we believe we were already headed that way. At any rate, we saw a very rapid drop in the equity markets now followed by a very sharp rally. We feel the spectrum of outcomes is extremely wide and favours a portfolio diversified across a few asset classes with an emphasis on those that can hold firm or rise during equity market weakness. These include currencies of net creditor nations like Japan or Switzerland. We also favour government bonds and precious metals as diversifiers.

There is a heated debate going on behind the scenes whether we are to see deflation or inflation going forward and this battle is being fought primarily in the credit market arena. We feel it is important for investors to pay close attention to the credit markets as they often better predict the path forward than do equities. Our hunch is that we are going to experience a deflationary period but that at some point all this central bank madness will give way to inflationary pressures assuming the velocity of money picks up. We are therefore happy to hold government debt in the near term but are mindful of the risks in doing so during periods of heightened inflation. As always, we feel that some exposure to companies that have strong and durable competitive advantages is wise. It is however worth noting that equities are by no means cheap at these levels.

TOP PICKS

MICROSOFT (MSFT NASD)

Microsoft is a “buy hold, and forget” type of company. Really well run, high margins, no debt, lots of cash and room to grow. What’s not to like?

KAKAKU.COM (KKKUF OTC)

Kakaku is a really neat, small-ish Japanese company that we recently bought. They have two primary services; think OpenTable and Amazon for Japan, plus many more. They also got great track record of innovation, high margins, no debt, nice cash balance and room to grow. Sound familiar?

ROSS STORES (ROST NASD)

We have owned Ross Stores since 2014. It’s very well run and predictable. Shares are off as their stores are closed, but this is a great long-term story.

PAST PICKS: MAY 2, 2019

RIGHTMOVE (RTMVY OTC)

• Then: $14.18
• Now: $12.46
• Return: -12%
• Total return: -12%

CONSTELLATION SOFTWARE (CSU TSX)

• Then: $1,187.66
• Now: $1,366.89
• Return: +15%
• Total return: +16%

CI FINANCIAL (CIX TSX)

• Then: $19.52
• Now: $14.10
• Return: -28%
• Total return: -25%

Total return average: -7%

COMPANY TWITTER: @hillside_wealth
PERSONAL TWITTER: @jasondelvicario
WEBSITE: www.hillsidewealth.ca
BLOG: https://hillsidewealth.ca/category/vlog
LINKEDIN: Jason Del Vicario or Hillside Wealth Management