A Comment -- General Comments From an Expert (A Commentary)

Both he and Rebecca Teltscher spent their formative years at Leon Frazer, where the rule was no more than 20% in a sector, and no more than 5% in any one company. You want to be concentrated, not taking 100 positions at 1% each. Otherwise, it's too hard to keep track of and you lose focus. People do it, but his firm feels they perform best when materially invested in each company. But not so materially that one investment is going to sink the portfolio. Be focused, but watch out for concentration risk.

With more experience, he's learned to let good positions keep going. Focus more on building up the rest of the portfolio than trying to pick a top on winners.

If a position has outperformed (such as AEM, which has gone from a 2% position to 6%), it's good practice to take a percent off and redeploy into something that hasn't done as well (such as BCE or T). On balance, if you do that consistently then you'll do well over time.

Be careful not to claim you know that "a top" has been reached and cut your position back to 2%. Sometimes, good companies keep being good.

His team, too, is nervous about putting cash to work now. They buy what they can at levels they like. Try to diversify the portfolio as much as possible -- on geography and industry. For the rest, they'll be patient and wait. There's always another train coming.

The first 10 weeks of the first quarter hurt, and then everything's come back in the last 3. Reminiscent of 2025.

He thinks we're going higher. The market is supposed to be a future predictor, and 3 weeks ago people thought there would be another TACO. It looks as though the Iran war is in the rearview mirror. Here we are in earnings season, so that's perfect timing.

We're back on the bandwagon for AI.

The last time we were up here would've been Oct/Nov of 2025. Everyone talked about rotation out of growth to value. 

He thinks, rather, that people took $$ out (not completely, just took profits) of the AI infrastructure and picks & shovels buildout. This money was put toward the end users who are truly using AI, and where it's been showing up for the last couple of quarters.

One example of AI evidence is with the big banks. Not only is AI making them more productive, but it's actually generating revenue. Similar examples exist in healthcare, retail, and logistics.

Volatility has increased lately, but long term value will be created. Know what you own and be confident in those stocks long term. Take Berkshire Hathaway for example, which has compounded over time and more than doubled index returns, however, it in 3 years of its 60-year history when it fell over 50%. The market will always test your conviction. Don't miss out on superb opportunites, such as over fears of AI.

The market seems to be saying the war will have little impact going forward, but the oil market is different. The narrative coming out of the White House changes by the war. Futures were down overnight after Washington announced the blockade. As long as the impact is only temporary (a few months), then earnings will matter more. Many companies won't be reporting to the end of March, though a few are. Immediate impact of this war: inflation and higher interest rates. Companies like trucking will be impacted and those with huge capex, too, as rates go up, until there is a lasting resolution to this war. Long-term, if December oil prices break above $80, then there'll be more permanent damage; if it falls below $70, we're past the worst of it and things improve.

He loves precious metals. But they are cyclical and have gone years with terrible performance, as history shows. The US debt story is now coming to roost, and is the biggest catalyst in recent years for metals. The story isn't over. If you're long for 10-20 years, buy the dips. If you're holding 1 year, he doesn't see precious metal prices moving much. 

Mitigating portfolio risk when fixed income won't: the uncorrelated asset class. ETF QAI offers a balance, steady return, outperforming money market or bond market ETFs or commodities. Also hold a world stock ETF and a market neutral ETF. Uncorrelated asset classes can give you growth and reduce risk. 

Seeing a lot of fluctuations. What's really telling about markets right now is this stairstep pattern that's emerging.

We'll see a bad market headline, or something relating to Iran/US, and the market sells off while oil spikes. Eventually we get a piece of good news, and that sends the market higher. Each time that happens, the market move higher is a bit more resilient and the following pullback is a bit more shallow. That tells him that the market's climbing this wall of worry.

Last week on the ceasefire agreement news, we saw oil drop 10-15% on the day. We don't need to see the Strait opened, or a definitive agreement between the US and Iran. We can have some starts and stops. The market's pricing in an eventual resolution. 

Markets really move on the rate of change, and that's what we're seeing here.

He really looks at the VIX as the arbiter of truth. When it spikes above 30 (as it did 2 weeks ago), that's when he looks to allocate to growth stocks. They were likely hit hardest into that drawdown, and they'll likely perform the best in a bounce back.

When the VIX is between 20-30, investors would do well position defensively. It's a time of market indecisiveness, with forward returns being quite weak. You're looking at HALO names, energy, and consumer staples.

With the VIX below 20, investors can position between growth and defensive names (with a slight tilt towards growth). Returns from this point tend to do quite well, though not as well as when the VIX is above 30.

Investors can aim for a barbell approach between HALO (Hard Assets, Low Obsolescence) stocks that are non-AI and HALO stocks that are AI. That gives you upside potential through AI, as well as through defensive sectors that are not in AI.

Definitely thinks this is a long-term story. We have a lot of supply constraints, and the growth story is still very much intact.

The data centre buildout has a lot of parallels to the railroad buildout of 100 years ago. Of course, there will be some mini-booms and busts throughout the cycle.

At his firm, they prefer stocks that are making new highs with momentum in their favour. Usually that indicates that something right is happening at the company.

Telecom space has certainly been under pressure. Discount plans have been offering deals, creating internal churn. Serious headwind of reaching peak phone purchases.

Safe stock: generally pays a lower yield, has a cheap/modest valuation, lower levels of volatility.
Volatile stock: associated with a compounder, traditionally pay low/no dividend yield, high volatility, premium valuation.

The key factor is that many investors equate volatility with risk. But really, volatility can just be the engine of compounding. Some of the best-performing stocks over the last decade have all had a 50% drawdown at some point. That’s not always a reason to sell.

He did an analysis across 1000+ stocks. Stocks that have compounded the best over the last decade look nothing like what most investors are comfortable buying. Most want a good dividend yield, low volatility, cheap valuation. Actually, some of the best-performing names have high valuation, lots of volatility, and low/no yield. These names typically take FCF and reinvest it back into the business for future growth. Nascent companies often have lumpy earnings, but the long-term trajectory is intact.