Educational Segment | StockChase
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Compiling comments that experts make about stocks while on public TV.

Educational Segment

Date Expert Opinion Subject
2017-02-06 Larry Berman CFA, CMT, CTA

Educational Segment.  Measuring Risk and Reward.  Within 20 years the vast majority of money in the world will be run by computers.  The traditional portfolio manager will be gone.  E.g. SU-T, 25% of the sector, a big player.  Going back 10 years it has made nobody any money for 10 years.  It is up less than the dividend.  Buy it when it is cheap relative to the benchmark and the markets.  Figure out how much you need in your portfolio.  The price of oil is the most important factor in the stock price.  Looking at the 5 year chart it is incredibly overvalued.

2017-01-30 Larry Berman CFA, CMT, CTA

Educational Segment.  Smart Factor ETFs.  Reducing portfolio risk.  The trend between actively managed mutual funds compared to what capital is going into ETFs show money is moving that way.  You can do asset allocation with ETFs and that is by far the most important consideration.  The bigger companies dominate the NASDAQ.  Three sectors make up half the index.  It is very concentrated and heavily weighted into a few stocks.  All smart factor ETFs beat the index.  They all have different volatilities.  You should use all of the indexing strategies in your portfolio. 

2017-01-23 Larry Berman CFA, CMT, CTA

Stop Losses.  Using stops in portfolios is a certain kind of style for people who do not understand diversification and are pure momentum players.  It is fine.  But the vast majority of guests on BNN are portfolio managers and have a long term horizon.  Being stopped out can be silly in that case.  He is going to do a series on them in his educational segment in the future. 

2017-01-23 Larry Berman CFA, CMT, CTA

Educational Segment.  Smart Factor ETFs.  Research affiliates.  He showed a graphic depicting smart factors that look at momentum, volatility, liquidity, profitability, etc.  If you calculate excess returns, on average over history about 40 years you average about 2.4% in excess return.  The average volatility is mostly less than the index.  A second graphic looked at cross correlation of factor returns.  If you put two together in a portfolio you get diversification. 

2017-01-16 Larry Berman CFA, CMT, CTA

Educational Segment.  Smart Beta ETFs.  Sustainable yield.  High dividend stocks can’t usually sustain the high dividends.  Sphere’s strategy aims to offer sustainable dividends.  You have to eliminate stocks from an ETF that can’t sustain high dividends.  They have a screen for these companies.  You lose a little yield, but greatly reduce volatility.  SHC-T is a Canadian sustainable high yield ETF.  They have US, Europe, Asian etc as well.  It is not always about the MERs. 

2017-01-09 Larry Berman CFA, CMT, CTA

Educational Segment.  How to play the market if you are risk adverse in 2017.  Are Trump policies coming in or not?  Over the last 10 years the marginal tax rate for corporations has come down from 50% in 1955 to 35% recently.  Analysts expect 22% earnings growth from the S&P.  The PE of the S&P is 21 times.  It is a 23% world GDP economy.  The banks have been the big leader since the election.  It’s going to take a lot of interest rate hike to get the banks back to where they should be with interest rate spreads.  There is a new president, first term, new party.  The average pattern has half a percent gain.  We have already exceeded that.  The inauguration is pretty much the high point for the year.  Get into options late in the market cycle. 

2016-12-19 Don Vialoux

Educational Segment.  When Stocks are Overbought or Oversold.  Look at the percentage of stocks above and below their 50 day moving average.  Below 20% (30% in Canada) is a buying opportunity and above 80% is a selling opportunity.  These give you signs of the market preparing to sell off or to go up after buying.  He suggests you hold off until inauguration day and then you have a good opportunity to take money off the table.

2016-12-12 Hap (Robert) Sneddon FCSI

Educational Segment.  How to Use Stop Losses.  It is part of risk management.  Look at your position sizing.  Do you have too much in one stock because it has done so well.  Knowing when to sell is a hard thing.  Look at the beta of your portfolio.  To exit, you could use a volatility stop (VSTOP – Google it).  ‘VSTOP’ is a calculated stop loss point that incorporates the volatility in the stock.  Look at moving averages.  You might sell if it breaks the 10 day.

2016-12-05 Don Vialoux

Educational Segment.  Why the TSX outperforms in the early part of the year.  The Canadian market outperforms the US from December to the end of February.  It has to do with commodity prices, which move higher.  Crude oil is at the end of its seasonal weakness after which it moves higher.  Silver moves higher from December into March.  Copper moves higher from now until April.  Gasoline goes up from now until the beginning of March. 

2016-11-21 Larry Berman CFA, CMT, CTA

Educational Segment.  Momentum and value in smart beta ETFs.  Vanguard has a couple of smart strategies.  They think smart indexing is an active strategy.  They debate Larry in disagreeing it is active in that it is a set of rules.  The Momentum strategy is benefiting from a behavioral bias in the market place where investors are slow to react.  The Liquidity strategy focuses on companies that are smaller and don’t trade as much, aren’t in the news as much and so may be undervalued.  Investors overpay for liquidity in the market place.  Less liquid names, also have more risk.  A quarter of Vanguards assets under management are actively managed.

2016-11-14 Larry Berman CFA, CMT, CTA

Educational Segment.  Smart Beta ETFs.  First asset’s approach is to work with morning start.  They have been working on quantitative modeling with dates going back to the 1980s.  They created a screen.  They look for companies that are trading below net asset value and have growth potential.  They screen for companies with price momentum as well as earnings momentum while having value.  These two strategies since inception have extracted some of the better companies.  Over 2 years the two strategies together outperform 90% of the time and 100% of the time over 4 years.  VRX-T was in the momentum portion and was rebalanced on a quarterly basis and got trimmed back.  You could equal weight the strategies.

2016-11-07 Larry Berman CFA, CMT, CTA

Educational Segment.  Smart ETFs - Multi-factor products.  iShares has a forecast on where things are going.  They see $1 Trillion US$ by 2020 and 2.5 by 2025 in these products.   There are two factors suggesting these forecasts:  They has the potential to disrupt active management; and the have the potential to address the challenges investors are facing in today’s market.  What is new about mult- factor investing is the technology. It is based on long term proven drivers of return.  Their approach of combining factors means you don’t have to forecast which is the winning factor of the future.  Value, size, quality and momentum are the four factors they combine into one investment solution.  If you look at F-class (compensation component of cost is removed) mutual funds they have a cost of just below 1%.  iShares multi-factor ETFs are 45 basis points.  It is more affordable.

2016-10-31 Larry Berman CFA, CMT, CTA

Educational Segment.  Fundamental Indexing.  Market Cap indexes are the traditional way to do indexes and fundamental indexing looks at cash flow, profitability, dividend sustainability and so on.  It is a rules based approach that focuses on the strength of the underlying companies.  Market weight is a popularity contest.  E.g. Nortel.  It went from 3% to 30% of the TSX index.  It represents a key flaw of market weight investing.  You would have ridden it all the way back down.  VRX-T did something similar being 9% of the TSX 60 at its height.  Returns are better in fundamental indexing rather than market cap indexing.  It will not win over every part of the cycle but long term it wins.  Larry’s guest runs his screen once per year.  Running it more often incurs trading costs and so on.  Research shows you only run it once a year.  These funds have a few basis points more MER and are worth it.

2016-10-24 Larry Berman CFA, CMT, CTA

Educational Segment.  Smart Beta ETFs.  They are smart indexing products.  Low beta or volatility strategies address investor outcomes using Beta.  They look for low beta.  If you weight beta and ensure diversification across the market place, you get less risk.  Low beta is not expensive but in line with the market place.   There is also a ‘quality’ based set of ETFs.  They look at debt to equity to reduce volatility.  These ETFs are managed by computer and not actively managed by a portfolio manager.  You pay a bit more than a non-smart ETF.  The low volatility and higher quality strategies have historically done better through history.

2016-10-17 Larry Berman CFA, CMT, CTA

Educational Segment.  ‘Smart’ ETFs.  A Beta of 1 means ‘market’. They researched factors back to the 1950s and if you screen for these factors you can do better than market weighted portfolios.  You can pay a bit more, but you get a slightly better return.  Smart ETFs are rule based rather than actively managed.  This is the fastest growing area in ETFs.

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