Rick Stuchberry, portfolio manager at Wellington-Altus Private Wealth
Focus: Canadian large-caps and international ADRs


MARKET OUTLOOK

Currently, it’s much easier to be bearish than bullish. While we may have been wrong not calling the bear market cycle sooner, we continue to think this will be short lived. That said, a bear market cycle can last on average for 300 days and if this downturn in the market isn’t short lived as we expect it will be, it could be another 300 days or more in the mud.

The stock market sold off 25 per cent on Black Monday in 1987 and still closed the year higher because it occurred in a growing economy. Our current economy is one of the most innovative in history: we have another leg of progress in Web 3.0, artificial intelligence, blockchain and an overall digital disruption in the legacy economy. As we look forward with this positive backdrop, it’s nearly impossible to be bearish, yet the market is very much so due to the uncertainty.

In order for the stock market to grow, we need this uncertainty to be sorted out. While some of what’s causing it will be easy to solve, some of it is truly a challenge that could take an immeasurable amount of time. The issue that will take the longest to sort out is the U.S.-China conflict, which is truly a fight for control of the 21st century. For 30 years, we have witnessed the meteoric rise of China. The U.S. has officially taken issue China’s growing strength and as of 2018, it’s basically said that China has to go through them to take control of the future.  America’s recent actions have categorically shown that they will do everything in their power not to lose this war. While this political environment is an uncomfortable place to be, it could become a new normal for us and we may need to get used to it. Like the cold war with Russia, this new cold war with China could last for some time.

Through history, we’ve seen that the market reacts badly to uncertainties. While most of the other uncertainties are coming from the White House, we think we’ll go back to the old sentiment in time. We always like to say that political uncertainties are a buying opportunity. One thing to be thankful for is the fact that the U.S. constitution doesn’t allow for a permanent president and change is inevitable — in this case for the better.

We felt our approach to hold significant cash balances and strong balance sheet companies was the right thing to do, but we still didn’t get the results we wanted. The positive is that the companies we hold are strong and while the market dragged them along for the ride, we believe they continue to be good investments in the long run. In the future, we intend to keep significant cash balance as markets show vulnerability and to take advantage of weaker markets to make investments in companies we believe in.

UPDATE

We sold some Twilio (TWLO.N) as it surpassed $100 per share. Regular profit-taking.

TOP PICKS

Rick Stuchberry's Top Picks

Rick Stuchberry of Wellington-Altus Private Wealth shares his top picks: Tencent, Alibaba and Teck Resources

TENCENT (TCEHY.PK)

Tencent is a platform-level tech company in China, with over 600 million daily users and near-monopolies on many online services. Its growth profile has been in the 30 per cent for five years.

ALIBABA (BABA.N)

Alibaba is very similar to Amazon fundamentally. It has suffered from money flow leaving Chinese stocks, but has not had its business slow; in fact, it has accelerated to the upside. Past quarter revenue grew 62 per cent and we think it remains well positioned and will continue to grow.

TECK RESOURCES (TECKb.TO)

Teck has a strong balance sheet with good cash flow and we expect to see solid share buybacks and dividends from the company. We think the stock is cheap and any upside in commodities will push shares higher.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
TENCENT Y Y Y
ALIBABA Y Y Y
TECK Y Y Y

 

PAST PICKS: OCT. 23, 2017

Rick Stuchberry's Past Picks

Rick Stuchberry of Wellington-Altus Private Wealth reviews his past picks: ING Groep, Royal Bank and Spin Master.

ING GROEP (ING.N)

  • Then: $18.51
  • Now: $11.94
  • Return: -35%
  • Total return: -35%

ROYAL BANK (RY.TO)

  • Then: $101.42
  • Now: $98.64
  • Return: -3%
  • Total return: 2%

SPIN MASTER (TOY.TO)

  • Then: $50.38
  • Now: $44.60
  • Return: -11%
  • Total return: -11%

Total return average: -15%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
ING Y Y Y
RY Y Y Y
TOY Y Y Y

 

FUND PROFILE

Custom Managed Balanced Account Composites
Performance as of: Dec. 31, 2018

  • 1 year: -4.5% fund, -8.9% index
  • 3 years: 6.0% fund, 6.4% index

INDEX: S&P/TSX Composite Total Return.
Returns net of all fees and annualized.

WEBSITE: www.stuchberrygroup.ca
TWITTER: @stuchberrygroup