Ross Healy, senior portfolio manager at MacNicol and Associates Asset Management
Focus: North American large caps

MARKET OUTLOOK

For several months now, I have calculated and reported to BNN Bloomberg viewers that the intrinsic value of the S&P 500, and therefore its peak, was roughly 3,150. That exact value was reached last Wednesday. Since then, the market has been in retreat. That value depends on consensus earnings forecasts one year out from here and it has been remarkable that that value has not changed more than 1 per cent either way for many months now, as earnings growth forecasts have slowed to a bare crawl. The top-down market strategists may be calling for a good increase in earnings for 2020 from current levels, but the bottom-up analysts have barely changed their one-year forecasts for almost a year now. In this case where theory meets reality, I am curious to see whether blind optimism and heavy-handed stimulus will win out over the mathematics of the theorem of the limit.

As Barron’s Magazine wrote on Feb. 3, 1969, "the failure of the general market to decline during the past year despite its obvious vulnerability, as well as the emergence of new investment characteristics, has caused investors to believe that we have entered a new investment era to which the old guidelines no longer apply. Many have now come to believe that market risk is no longer a realistic consideration, while the risk of being underinvested or in cash and missing opportunities exceeds any other.” For those who can remember back that far, that market level stood as a peak for the next 14 years.

Does any of this strike a chord? It should as we are back there again.

TOP PICKS

Ross Healy's Top Picks

Ross Healy, chairman of Strategic Analysis Corporation, discusses his top picks: Manulife Financial, Power Financial, IAMGOLD Corp.

MANULIFE FINANCIAL (MFC:CT)

Has great fundamentals and decent yield.

POWER FINANCIAL (PWF:CT)

Cheap stock with excellent yield.

IAMGOLD (IMG:CT)

I like the gold sector and this stock is as cheap as they come.

 

DISLOSURE PERSONAL FAMILY PORTFOLIO/FUND
MFC N N Y
PWF N N Y
IMG N Y Y

 

PAST PICKS: DEC. 7, 2018

Ross Healy's Past Picks

Ross Healy, chairman of Strategic Analysis Corporation, discusses his past picks: Laurentian Bank, Pretium Resources, BCE.

LAURENTIAN BANK (LB:CT)

  • Then: $39.66
  • Now: $44.89
  • Return: 13%
  • Total return: 20%

PRETIUM RESOURCES (PVG:CT)

  • Then: $9.86
  • Now: $13.37
  • Return: 36%
  • Total return: 36%

BCE (BCE:CT)

  • Then: $56.96
  • Now: $63.79
  • Return: 12%
  • Total return: 18%

Total return average: 25%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
LB N N Y
PVG N N Y
BCE N N Y

 

TWITTER: SVAInsights
WEBSITE: Strategicanalysis.ca
BLOG: The Occasional Contrarian

BNN Bloomberg is a division of Bell Media, which is owned by BCE.