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

Gold is a weird investment. You can justify so many reasons why it should perform, did perform, or didn't perform. If you take it down to the company level, they haven't created value for people. A segment of the market that he prefers to avoid. In general they don't work, except for the very expensive ones like FNV.

All of the easy gold in the world has been found. The geopolitical risk to finding more is stratospheric. A find can change in a heartbeat, when a government isn't just going to let someone take gold out at massive prices. Instead, they'll expropriate it.

Gold price has been riding high, mainly because central banks around the world have been accumulating it to diversify currency risk. That could change at any time, leaving gold not as strong.

If you're determined, look at royalty companies or a physical gold ETF to diversify your portfolio.

Laura Lau
Long-term holds, preferably an monopoly or duopoly, pricing power, innovation, sleep at night. Not a lot of stocks can do this.

Brianne Gardner
Good profitability in terms of where we are in the business cycle. If she can hold it forever, she will. If she wants to trim it along the way, she will. Fundamentals, cashflow, strong management. Sleep-at-night stocks are the ones you want to hold.

David Burrows
He looks for companies that are good to begin with, but getting better. He loves companies that the world sees in one light, but things are changing, and they could get revalued to a higher level. He tries not to fall in love, he will sell. High-quality companies in areas of the market that are going through some kind of structural change that will benefit them for an extended period of time.

Laura Lau
Yes, but you have to be pragmatic. You can't always fall in love, because sometimes things change. A company may not be able to keep up, or the innovation isn't there. Or, for risk-management purposes, you do have to trim.

Laura - MU
Most stocks in Canada actually fit in the "dating" pool, as we are a cyclical economy. Even the banks are cyclical. Time to own deep cyclicals is when they're at their worst. In the US, the most cyclical part of the economy is semiconductors. Within that space, the most cyclical are memory chips, prices went down 50%. Now is the time to buy. Tailwind of more AI content in phones, PCs, and data centres. Yield is 0.56%.

Brianne - GRT.UN
Dipping her toe in, tactical trade opportunity, not too committed for the longer term. Focuses on industrial and logistics space. Stable 4.55% dividend. Real estate sector is negative YTD, hasn't done well over the past 2 years. Sees stability in the industrial space. Interest rates coming down reduces debt payments, leaving them with more cashflow and profitability, allowing it to expand and grow its portfolio. An 8/10 for her. Potential upside from analysts is about 18%.

She owns it and wants to continue, but 2024 could be the year you serial date. Lots of opportunities out there beyond the Magnificent 7.

David - SU
For dating, there are lots of companies and industries that are a little more cyclical. There's a time to own them, and a time not to. Energy sector's retrenched over the last little while, coming up to when it's better seasonally. Long-life assets are interesting, and SU has them. Great dividend of 5.04%. Good job paying down debt.

Could start as a date, as you have to take a little risk, but then might turn into a long-term relationship. 

Laura Lau - MSFT
A monopoly in software. And then you layer on the AI. Subscription business is just going to get bigger and bigger. Has the trust of businesses. Yield is 0.74%. 

Brianne Gardner - MSFT
Quality partner. Great, stable business. Dependable, can trust management. Long-term play, even after 60% return over past 12 months. Participating in the AI boom, and AI isn't going away. ATVI acquisition will start paying off this year. Street has $450 price target. Continuously outperforms top and bottom lines on earnings, 20% earnings growth expectations, 15% revenue growth expectations. She's committed for the long run.

David Burrows - JPM
A company that you can trust. Over time has been through a lot of ups and downs, wants to continue to grow, continues to invest in itself. The absolute leader in the banking industry. Opportunity is the consolidation in regional banks. Invest a lot in technology. Great for earnings and dividend growth. Yield is 2.39%. Financials tend to do well in a world of rising interest rates over time.

Look for companies that do well in good time, but that has also proven itself during the most difficult times. That's the kind of stock you want to marry.

David Burrows
They have to continue to do what they say they're going to do. Ideally, outperform. He doesn't want companies that are promising the moon, but wants companies that are delivering. When you go through difficult periods, scrutinize the holdings you have to see who's following through. 

The companies that today's guests have chosen to marry, MSFT and JPM, have been very predictable in the way they deliver.

Laura Lau - RACE
The stock raced away from her :)  Great company and brand name. She was concerned about the very high valuation. Don't make a lot of units per year, so if there are issues and you don't meet expectations, the market's not very forgiving. Going forward they're expanding production, which will help support the valuation.

Brianne Gardner - GE
Heavily invested in the industrial space, wind turbines, airline engines. Before January 2023, the stock wasn't working, so it wasn't on her radar. Up 96% last year, and another 12% YTD. Yield is 0.22%. Didn't check all her boxes. Ranks 4/10 on value, 5/10 for fundamentals. Sometimes for the one that got away, everything happens for a reason.

If you do hold it, not a bad time to take some profits off the table. Spinning off healthcare and energy.

David Burrows - RACE
Lots of fish in the sea, and he's wanted this for a long time. He just didn't think they could afford it. Has shown it's recession-proof, as there's so much demand. At the very highest level of luxury goods, even recession doesn't seem to slow it down. Beautiful cars, and more people want them than can have them.

Expensive for a reason, and sometimes great companies are that way. Sometimes you just don't get another opportunity. Could probably be bought here, but it's expensive. 

Laura Lau - HSY
Great company, but facing an issue: biggest input, cocoa, has doubled in price. Either they increase the price and people buy less, or margins get squeezed. People will still buy for Valentine's, Easter, and snacking, but they'll buy less. They'll buy something that's cheaper.

Also facing headwinds from the GLP-1 obesity drugs.

There's still upside this year despite yesterday's sell-off (on hot inflation data), but it did break the white-hot momentum in the market. He's surprised by the rally so far this month, since he expects February to be a down month.

Bitcoin rises above $51,000. He bought it before the ETF was approved. He got back into this week recently, because marketing machines are competing to get people to buy the ETFs. Cryptos trade on technicals and momentum more than any other. This will keep rising past $60.

Common Investor Mistakes: Anchoring Bias

A classic mistake by new investors who may want to ‘anchor’ their beliefs to a specific value or price. Typically when a stock or the market as whole moves beyond a previous threshold (such as an all-time high), investors might anchor their expectations to that certain price, and begin to feel that any price above all-time highs is too much. 
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The S&P is making new highs, there's optimism that inflation will be tamed and a recession avoided, but beneath the surface are cracks. We're seeing the widest dispersion between GDP and GDI in 20 years. GDP has been growing, while GDI (income) is flat or slightly negative. GDP appears to be doing well, but the economy is living beyond its means. Consider record-high credit card balances while in December in the U.S. the savings rate was 3.6%, among the lowest in decades. Employment numbers are contradictory, with companies reporting few job losses, but households reporting more when surveyed. This lack of spending power will put downward pressure on inflation, and falling interest rates will benefit stockholders (particularly Canadian dividends) bondholders and real estate. But this move is taking its time, not fast.

Annual ETF conference in South Florida giving investors details on new ETF products (Bitcoin very popular). CPI reading this week will be indicative on state of economy. Expecting a slight uptick on inflation. Believes market is over confident in amount of upcoming interest rate cuts. Upcoming corporate earnings (especially NVIDIA) will be interesting to watch. Suspects NVIDIA is due for a correction, and is short on the company (valuation way too high). 

Best strategy that thematic/portfolio construction investors can do is think about how they can separate themselves from index funds. Would advise potential investors to build 50-60% of portfolio in index funds, and then add riskier/unorthodox assets (ETF's etc.). Other examples of different assets classes include renewable energy business which are currently out of favor. Out of favor utilities/medical marijuana are also out of favor sectors that would add beta to an investor's portfolio. 

Market Overvalued?

Let’s look at an example of when the market was ‘overvalued’ using the forward P/E multiple for the S&P 500. We can see that in mid-2020 when the markets were recovering from the rapid drawdown earlier in that year, the forward P/E was at a staggering 25X. Yet, Over the next four years, the market gained 60% (roughly a 14% CAGR), AND the forward P/E came down to 20X. This is just one example of why basing one’s investment decision based solely on one figure and estimate can be misleading. As a reminder, it is not timing the market that is important, but time in the market. 
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