Jeff Parent's Top Picks: Jan. 3, 2020

Jeff Parent, chief investment officer at Castlemoore Inc.
Focus: Technical analysis

MARKET OUTLOOK

It’s hard to argue that 2019 was anything but a great year. Both local and international markets performed well above average, with typical returns in the 20 to 30 per cent range. In the U.S., the NASDAQ led the way with close to a 40 per cent return. Deeper down though, the markets spent most of the year recovering from the very poor Q4/18. We didn’t see new highs until this fall and about a third of the returns were simply a recovery of the December 2018 drop.

Advances in the large-cap tech space certainly led the way higher, but the gains were broad. The Canadian markets were hampered by a lacklustre energy sector, but there are signs of a recovery and some potential for market leadership in 2020.

The past 15 months have been a great test for portfolio managers. Now that we’re at the beginning of a new year, what is our outlook? We’re optimistic: Barring any major natural disasters or geopolitical events, the expectation is for a normal, positive year. Tech seems overvalued, but there’s a lot of momentum behind the usual names. In Canada, banks look sluggish and should be avoided until we begin to see an upside breakout. Interest rates will be the story to watch. With a continuation of the positive economic trends, there will be pressure on fixed income and potentially our currency. Technically, the presidential cycle favours 2020.

TOP PICKS

MARVELL TECHNOLOGIES GROUP (MRVL:UW)

I bought this recently at $26.17. It’s a bit of a play on the 5G space. A continuation pattern is forming on the chart. On a breakout above $28 this could see a decent return, possibly to $35. Sell out below $22.75.

BCE (BCE:CT)

It’s good to have a few stalwarts in a portfolio like BCE. From a technical viewpoint, this is looking like a good opportunity, trading at a $59.60 support base with an upside potential back to $65. The dividend looks secure. Sell below $58.

MCDONALD’S (MCD:UN)

After a bad earnings report in October, the stock dropped about 10 per cent. Now that it seems to be finding a bottom, it may be a good time to buy. I would consider this a defensive stock. Sell below $191.

PAST PICKS: JAN. 4, 2019

FIRST TRUST DJ INTERNET INDEX ETF (FDN:UW)

I sold out in December and swapped in the Vanguard IT ETF (VGT). I first bought FDN in September 2018 and took a loss selling on December 2018 and that same month in  2019. I wouldn’t buy right now.

• Then: $119.80
• Now: $140.28
• Return: 17%
• Total return: 17%

CRESCENT POINT ENERGY (CPG:CT)

I didn’t hold at the time it was a top pick, but did trade Crescent Point twice in 2019, making 30 per cent on the first trade and 55 per cent on the second. I don’t hold the stock now, but I’m continuing to trade the energies and currently hold Whitecap and Canadian Natural Resources.

• Then: $4.38
• Now: $5.95
• Return: 36%
• Total return: 37%

ADVANCED MICRO DEVICES (AMD:UW)

I never did buy AMD, with the stock going into the “got away” category. It looks lofty at this point, sitting at an all-time high. It might sell off to $45. Lots of expectations surround this company. I’m following, but wouldn’t buy immediately.

• Then: $19
• Now: $48.60
• Return: 156%
• Total return: 156%

Total return average: 70%