Stockchase Opinions

Larry Berman CFA, CMT, CTA BMO Low Volatility US Equity ETF ZLU-T COMMENT Aug 07, 2020

If you have a growth part of your portfolio, it should be in the TFSA. You want maximum growth in TFSA so he would not recommend it for these accounts.
$38.370

Stock price when the opinion was issued

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PAST TOP PICK
(A Top Pick Jan 11/19, Up 22%) A very safe ETFs. Low volatility stocks that are sort of dull, but they have done quite well in the markets recently.
COMMENT

ZLU is a top choice ETF of the US market -- he believes it is not currency hedged to the CAD dollar. He likes the lower volatility holdings. Good for conservative investors. He also likes the USMV ETF.

BUY
He's owned it for a while. It's had a nice, steady upward move. He's recommended it in the past, and this environment is good to enter into this ETF.
PAST TOP PICK
(A Top Pick Jan 11/19, Up 26%) He thinks this is still a good choice to weather the uncertainty right now. Low volatility ETFs are good when the markets are uncertain.
HOLD
Looks for companies that are less economically sensitive. Good time to add if defensive. Not as much value in stocks relative to tech names. Not a good buy for aggressive investors.
SELL

Healthcare at the top, and then pharma and food. When we're seeing an early-cycle move, low vol tends to underperform. At this time, you want more cyclicals and growth. But great if you want low beta.

WEAK BUY
ETF for US exposure?

Underperformed the last couple of years. Low volatility was all the rage when we had some corrections. We might have some more corrective action in US stocks, Warren Buffett has a massive cash hoard, Stanley Druckenmiller's calling for 0% growth in US stocks for 10 years. Volatility is tempered with ZLU -- it will go down less in a correction, but up less too. You might decide to stick with this for the long term.

BUY
ZLU vs. XST for less volatility in a bear market?

XST is made up of Canadian retail grocers. Huge weight in Loblaw and Couche-Tard, making up about half of the ETF. Rest will be Metro, Weston, Empire, Saputo, Maple Leaf. Somewhat resilient. No matter what happens in an economy, people need groceries. Less volatility than ZLU.

ZLU is low volatility exposure to a broader cohort of stocks, not just consumer staples. A US play. Lower volatility, but broader economic exposure. Will tend to outperform the S&P 500 in a market correction. Really likes it.

WEAK BUY

Canada doesn't have a version of this low-vol with a currency hedge. Now is not a good time to invest in the US. ZLU has outperformed the US market long-term with less volatility.  You get less bad when markets are bad and a little more good when it's good--like it for that.