MARKET OUTLOOK

Driven by a handful of technology and communications giants, the S&P 500 Index has remarkably made new all-time highs despite a global pandemic and lingering effects of an economic lockdown. The Index is up over 55 per cent from the depths of the March lows. Economic data continues to surprise to the upside and monetary policy remains decidedly dovish. However, potential risks linger on the horizon: a possible COVID-19 resurgence, escalating U.S.-China tensions and a disputed presidential election are potent hazards to consider. Market breadth has been notably lacking, with less than 45 per cent of the S&P 500 Index constituents on positive ground year-to-date. Lastly from a technical perspective, U.S. and global equities are undoubtedly in overbought territory as measured by the relative strength index (RSI) measure. 

In Stan Wong managed portfolios, we continue to favour growth stocks over value stocks. We prefer companies with high quality attributes (high return on equity, low financial leverage and low earnings variability) as we believe that they offer resilience during times of economic uncertainty. Equities with dividend appreciation characteristics are encouraged over those with high yields but no dividend growth. Looking ahead, we view select healthcare, technology, communication and consumer companies benefiting from structural trends accelerated by the global pandemic. Work-from-home, e-commerce, health sciences, retail consolidation and cloud computing are a few of the themes and trends that we expect to be in focus for many years to come. Our portfolios reflect these important themes and we believe that our clients are well-positioned to benefit from them.

TOP PICKS

iShares S&P/TSX Composite High Dividend Index ETF (XEI TSX) - Last purchased: June 2020 at ~$17

The iShares S&P/TSX Composite High Dividend Index ETF is designed to replicate the performance of the S&P/TSX Equity Income Index. The XEI ETF provides a compelling opportunity for investors seeking strong dividend income from established, large-cap Canadian companies. XEI currently pays over 5 per cent in a dividend yield with top holdings in Canadian pipelines, banks, utilities and telecommunications industries. With XEI still down over 14 per cent year-to-date, this provides an attractive buying opportunity. The ETF carries an expense ratio of 22bps.

Netflix (NFLX NASD) - Last purchased: July 2020 at ~US$485

With nearly US$25 billion in revenues and 193 million global subscribers, Netflix is the world’s dominant online entertainment streaming provider. Stay-at-home mandates and changing consumer behaviour resulted in a demand surge for Netflix subscriptions. NFLX’s breadth and depth of content is expected to sustain subscriber momentum longer-term and quell any meaningful competition. Expansion in international markets remains the growth engine for additional subscribers and revenue. The company’s estimated revenue growth rate of 15 per cent and earnings growth rate of 32 per cent over the next few years makes the shares very compelling for long-term growth investors. Netflix reports its next quarterly results on October 16th. 

Teladoc Health (TDOC NASD) - Last purchased: August 2020 at ~US$211

In more than 175 countries, Teladoc Health provides comprehensive virtual healthcare on-demand and is the largest company of its kind. Teledoc has partnered with employers, health plans, insurers and health systems to offer virtual access to it members and patients. The COVID-19 pandemic unquestionably accelerated further market share and revenue gains in the telemedicine and digital health industry. Indeed, TDOC’s estimated revenue growth rate of 30 percven  and earnings growth rate of 33 per cent over the next few years provides an attractive growth story for investors. Teledoc reports its next quarterly results on October 30th. 
 

PAST PICKS: September 11, 2019
 

American Tower Corp (AMT NYSE)

• Then: $230.07
• Now: $244.21
• Return: 6%
• Total Return: 8%

Merck & Co. (MRK NYSE)

• Then: $82.92
• Now: $85.07
• Return: 3%
• Total Return: 6%

Match Group (MTCH NASD) - Old-to-new-shares exchange: June 30th, 2020

• Then: $74.83
• 6/30/2020: $107.05
• Return: 43%
• Total Return: 43%

Total Return Average: 19%
 

Twitter: @StanWongWealth

Website: www.stanwong.com