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Opinions The Panic-Proof Portfolio (Stockchase Research)
BMO Long-Term US Treasury Bond Index ETFZTL.TOTOP PICKOct 21, 2021
Stockchase Research Editor: Michael O'Reilly We reiterate ZTL as a low MER ETF as a defensive buy. It is made up of long term (20-30 yr) US Treasury bonds and was the only sector that rose in value during the most recent market retracement. We think of it as insurance -- as such we will not set a stop-loss nor upper price objective. It pays a yield to park your cash and we like that it is in Canadian funds -- as we expect weakness in the Canadian dollar during a sizable market pullback. Yield 2.60%
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Stock price when the opinion was issued
E.T.F.'s
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COMMENT
TLT vs. ZTL
TLT will have withholding tax, so that will affect the yield.
In the hedged version of ZTL (ZTL.F), the cost of hedging is embedded in it and typically comes out of the yield. Today, he'd own the one with the .F extension and be fully hedged on his currency exposure in the US market.
The underlying assets are yielding the same thing, but the difference comes from the items noted above.
See today's Educational Segment.
E.T.F.'s
BUY
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Premium contentPAST TOP PICK
(A Top Pick Jan 24/23, Down 7.3%)Stockchase Research Editor: Michael O'Reilly
Our PAST TOP PICK with ZTL has triggered its stop at $40. To remain disciplined, we recommend covering the position at this time. This will result in a net investment loss of 14%, when combined with our previous recommendations.
E.T.F.'s
Premium contentTOP PICK
Stockchase Research Editor: Michael O'Reilly We again reiterate this defensive ETF holding US long term government bonds priced in Canadian dollars, as a TOP PICK. It acts as a good hedge against a pending recession. With interest rates near expected peak levels, this is a good time to enter again. We recommend trailing up the stop-loss (from $30) to $40, looking to achieve $55 – upside potential over 25%. Yield 3.6%
E.T.F.'s
Premium contentTOP PICK
Stockchase Research Editor: Michael O'Reilly We reiterate this defensive ETF holding US long term government bonds priced in Canadian dollars, as a TOP PICK. It acts as a good hedge against a pending recession. With interest rates near expected peak levels, this is a good time to enter again. US 30 year treasury yields remain within 50 bps of the levels reached prior to the 2008 financial crisis. We recommend keeping the stop-loss at $30, looking to achieve $55 – upside potential of 25%. Yield 3.6%
E.T.F.'s
Premium contentTOP PICK
Stockchase Research Editor: Michael O’Reilly A good defensive ETF holding US long term government bonds priced in Canadian dollars. A hedge against a pending recession. As interest rates have risen it has naturally gone down in value. US 30 year treasury yields are within 50 bps of the levels reached prior to the 2008 financial crisis. We recommend placing a stop-loss at $30, looking to achieve $55 – upside potential of 40%. Yield 3.6%
E.T.F.'s
DON'T BUY
Best to buy this if you already have USD, and not converting your CAD. Buying long-term bonds now is a very risky strategy if bond yields rise. Fed has already signalled it's embarking on swift unwinding. He'd be very careful of putting a lot of money into long-term bonds. Bond ETFs have not always tracked well versus individual bonds. You can probably employ a simple buy-and-hold strategy for individual bonds.
E.T.F.'s
Premium contentTOP PICK
Stockchase Research Editor: Michael O'Reilly We again reiterate ZTL, a low MER ETF holding long term US government bonds priced in Canadian dollars, as a defensive buy during this period of global uncertainty. Interest rates are on the rise and the ETF has taken its lumps, but we view it as a safe haven for the foreseeable future. We think of it as insurance -- as such we will not set a stop-loss nor upper price objective. It pays a yield to park your cash and we like that it is in Canadian funds -- as we expect weakness in the Canadian dollar during any sizable market pullback. Yield 3.16%
