John Hood, president and portfolio manager at J.C. Hood Investment Counsel
Focus: Options and ETFs

MARKET OUTLOOK

I remain bullish on the U.S. economy. The inverted yield curve scare has been diluted and bond yields are up a bit, U.S. markets have had their best quarter in 10 years following the December plunge, there are lower inflation expectations, the S&P 500 is at 2,860 (just off the October highs of 2,930), the Fed seems unlikely to hike rates more than once this year, trade talks with China are progressing … What’s not to like? Canada will no doubt be helped along by the still-strong U.S. economy, but obviously energy policy is a dead duck and investors are heading elsewhere.

UPDATE

I sold ZWE in the fall because it was always getting burned in Europe.

TOP PICKS

BMO EQUAL WEIGHT U.S. HEALTH CARE ETF (ZUH.TO)

I have recommended this ETF before. Unlike XLV it’s not overweight big pharma and it doesn’t go into small caps or it’s too niche like XHS (services and retail drugs) and XHE (equipment) are. It’s very well diversified with hospitals, pharmaceutical companies, biotech and life science services and supply. Fees are the same as the ones for XHE and XHS at 0.35 per cent, though they’re higher than XLV’s 0.13 per cent fees. Equal weight and hedged.

FIRST ASSET MORNINGSTAR NATIONAL BANK QUEBEC ETF (QXM.TO)

Holds companies headquartered in Quebec. Broad-market TSX ETFs are 70 per cent financials, energy and materials; this ETF broadens the asset mix to consumer staples, consumer discretionary and industrials with companies such as Couche-Tard, Saputo, Metro, CAE, Dollarama and also BCE. Fees are high at 0.50 per cent, but I like the diversification.

BMO COVERED CALL UTILITIES ETF (ZWU.TO)

For the yield investor, covered calls on utilities yields 6.1 per cent. Its holdings are 70 per cent Canadian and 30 per cent U.S. As for sectors, it’s weighed 46 per cent utilities, 28 per cent communications, 25 per cent energy. Vulnerable to rising rates, but they appear to have settled. Fees are high at 0.73 per cent.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
ZUH Y Y Y
QXM N N N
ZWU Y Y Y

 

PAST PICKS: FEB. 9, 2018

ISHARES S&P/TSX CAPPED COMPOSITE INDEX ETF (XIC.TO)

  • Then: $23.92
  • Now: $25.87
  • Return: 8%
  • Total return: 12%

BMO EUROPE HIGH DIVIDEND COVERED CALL HEDGED TO CAD ETF (ZWE.TO)

  • Then: $20.78
  • Now: $20.20
  • Return: -3%
  • Total return: 5%

ENERGY SELECT SECTOR SPDR FUND (XLE.O)

  • Then: $66.67
  • Now: $66.53
  • Return: -0.2%
  • Total return: 4%

Total return average: 7%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
XIC Y Y Y
ZWE N N N
XLE Y Y Y

 

WEBSITE: www.jchood.com