Full episode: Market Call for Wednesday, June 6, 2018
Keith Richards, portfolio manager at ValueTrend Wealth Management of Worldsource Securities
Focus: Technical analysis
Wow. There’s lots of activity on the markets of late. First we got a significant selloff in January followed by a rally, then a re-test of the precise low of January's selloff. Since that date, we’ve had substantial volatility on an intraday basis meaning that the direction of a market move seems to reverse mid-day more often than not. All of this is indicative of a state of confusion by market participants. When confusion reigns, news events that would normally be shrugged off will instead create panic on the market. This isn’t a prediction, but it’s possible as we've seen it happen before.
The ValueTrend “Bear-o-meter” recently signaled mildly higher risk conditions for the market as noted in this blog. This indicator compiles numerous trend, breadth, sentiment and momentum indicators into a relative risk/reward status for the market. Because the stock market hasn’t broken its primary bullish trend (despite recent volatility), the ValueTrend Equity Platform's cash exposure is currently contained to about 20 per cent.
Should our primary trend indicators break (200-day moving average and a move below January's low of 2,580 on the S&P 500), we will move into more cash. Should the trend remain intact and the Bear-o-meter read less risky, we will consider adding back to equity exposure. Meanwhile: We're happy to report that the ValueTrend Equity Platform is making new highs in a market environment that’s down in both the U.S. and Canada since January. Our forte is in migrating volatile markets. It appears that the platform's strategy is honoring that tradition with our recent performance.
Fairfax Financial (FFH.TO)
This stock is diversified through many areas including investment management, insurance and some exposure to India. Prem Watsa tends to act a bit like a hedge fund manager in buying “cheap” assets and waits it out to realize value. He also hedges things like inflation etc. Because of that, it might be a little non-correlated to the market, should you be concerned of a market correction.
Becton, Dickinson & Co. (BDX.N)
This medical tech company has a solid long-termed uptrend. We’re avoiding the fast movers — that is, charts that are parabolic. Should markets correct later this summer, they’d be the ones to be hit the hardest. The company shows a nice, even 45-degree uptrend. Fundamentally, they’ve made some acquisitions that inspire the likelihood of continued steady growth for the foreseeable future.
We are 23 per cent cash right now, so I thought it would be appropriate to hold one of my top picks as cash.
Past Picks: April 2, 2018
Brookfield Asset Management (BAM’a.TO)
We still hold this stock. Great long-termed trendline, solid longer termed hold for a Canadian stock.
- Then: $49.67
- Now: $52.25
- Return: 5%
- Total Return: 6%
Consumer Staples Select Sector SPDR (XLP.US)
As noted on the April show, this is the seasonal period for the staples (May until November) and it’s been the least loved of all sectors for the first part of this year—so it’s a contrarian play. It seems to be bouncing off of $50 – it might get to mid-$50s by the end of the summer. This is not a long-termed play – it’s an oversold bounce candidate. The longer-termed trend was broken and we’re simply looking for a rebound trade.
- Then: $51.34
- Now: $49.74
- Return: -3%
- Total Return: -3%
We bought a 3 per cent position in this stock. It has a constructive-looking chart: a gently rising, near-termed uptrend after breaking a more than three-year base pattern. To me, this looks like a classic setup for an ongoing uptrend over the coming years. Fundamentally, they have lots of debt, but have made strong headway into software in the auto industry. So it’s a higher-risk play, but it could offer significant upside if you want a turnaround story in your portfolio.
- Then: $13.80
- Now: $15.84
- Return: 15%
- Total Return: 15%
Total Return Average: 6%
ValueTrend Managed Account Equity Portfolio
Performance as of: May 31, 2018
- 1 Month: 1.8% fund, 2.8% index
- 1 Year: 5.1% fund, 5.8% index
- 3 Year: 5.7% fund, 3.3% index
* Index: North American Index
* Gross of any fees and assumes re-investment of all distributions with no cash outflows or inflows