Detecting Financial Scams: Don’t be greedy

Most scams prey on two strong emotions: fear and greed. On the greedy side, a lot of scams offer investors huge returns. Whether it is a sophisticated cryptocurrency trading platform or a basic pyramid scheme, the common element is that investors get excited about returns of 30 per cent or more and their greed makes them do less due diligence.

You do not need to be a financial expert to know that guaranteed investment certificates currently pay about five per cent. So, if you have been promised 20 per cent on some investment, you should know right away that something isn’t right. Sure, some investments can certainly return 20 per cent, but they involve a ton of risk, even if they are not outright scams. Your return is highly correlated with risks. This is something to remember with any investment.
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He just boosted his exposure to energy, now owning 13 names. If oil continues to trade at $65-85, that's perfect for the oil stocks though, yes, there could be pressure on these names. He just boosted his exposure to financials from 8.8% to 23% over a year. This includes regional banks.

Announced earnings, slightly mixed, and raised guidance. Trades under 16x PE and pays a 5% dividend. Likes it overall.

Growth is amazing and will accelerate. They have strength in cloud and data storage, and demand will only rise as companies use AI tools and that demand more cloud. He's happy to keep owning this.

You need to have medium-high risk tolerance to own names in this space, as they have more pronounced swings.

Is critical of Ottawa's latest tax changes, because it disincentivizes wealth accumulation and entrepreneurship, those who creates jobs. This will encourage flight risk.  Canada is seeing slow economic deterioration as unemployment and credit card defaults slowly increase, but there is no major systemic risk or irrational moves in the stock market. The U.S. is in a much better economic space with a strong consumer. He expects some, but not substantial interest rate cuts. Meanwhile, the Canadian government is spending which is inflationary.

Company Highlight: Prime Water Corporation (PRMW)

The second best performer was Prime Water Corporation (PRMW) whose stock price was up 12% on the month, 24% YTD and 24% over the past year. It is a leading direct provider of bottled water to consumers and water filtration services in North America and Europe, having withdrawn from Russia in the 2nd quarter of 2022.

The low for the stock price during the  past year was $16.58 in mid June 2023 from where it rose strongly  near the close to $24.64. The stock ranked no 3 performer in August 2033

Management notes that 2023 was a year of transformation and strong financial performance. PRMW continued to execute against its transformational strategy to become a pure-play North American company, achieving a major milestone as it completed the sale of a significant portion of the international businesses. On December 29, 2023 the European business was sold for $575 million. This plus cash on hand enabled PRMW to redeem in full $750 million of 5.5% senior notes. Cash on hand at year end was $507.9 million

Year end results were announced on February 28,2023: Revenues at $1.772 billion up 4.7%; net income at $238.1 million was up $208.5 million, of which $174.3 million came from discontinued operation.
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Alexander Hamilton (first US Treasury Secretary) suggested prudent use of leverage was good for society. However, politicians have abused debt in order to buy votes. Rising debt levels in the USA a major concern. Every recession in the past 50 years has followed with record debt levels. Current deficit comprised of 6% of GDP is set to rise. Fiscal outlook for US Fed is in terrible shape. Approximately $1 Trillion of debt expected to be raised by the US. US Fed competing with private companies for capital - investors will give their capital to government - which reduces amount leftover for entrepreneurs etc. Higher inflation will also require increased interest rates, which will increase the costs of servicing debt (money that could be invested elsewhere). Overall, is bad state to be in with colossal debt levels. 

The question was on life insurance stocks. He would lean towards the banking sector which has better valuations. However he is underweight in the financial sector with expectations of a weaker economy and a trend to lower interest rates.

Chips are must-haves in a client portfolio given trends in EVs, AI and data centres which all need chips. Chip revenues are about half-trillion today, and are expected to doubole by 2030. Buy an any pullback. Also lieks chips because of the cyclical story. After de-stocking, inventories of semis rose which weighed on the semis sectors. But slowly, those inventories are declining. Also, chip demand is closely tied to performance in the manufacturing sector. Watch Wednesday's manufacturing PMI and see if it continues to increase.

A beautiful chart and fundamentals look great.

Elon Musk is in China, and China will allow self-driving cars. Maybe, but probably not Tesla has restored momentum. Unlike Apple, Tesla perhaps is not defensive if you expect choppy markets ahead. Don't short Tesla, but he isn't sure we will return to the 2021 Tesla over the next 6-12 months.