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

Believes recent China stimulus program will keep markets higher globally. Markets very difficult to read at the moment with apparent strength on the back of rate hikes. Lots of investors playing catch up to index funds. Tax loss selling will create opportunities for buyers toward the end of the year. Companies that have been over punished the past few months, will present buying opportunities. If US Fed starts to cut rates, the US dollar will fall with rising commodities. US consumers appear to be insulated from higher mortgage rates with 30 year mortgage terms.. ~45% of Canadian mortgages will renew next year with higher rates (concerning for Canadian economy). 

Importance of Return on Capital:

The terrible business doubled its earnings in ten years but requires ten times more in PPE, that business is just better off not growing at all, as it massively dilutes the returns on Property, Plant and equipment (PPE), making it a less valuable business over time. 

On the other hand, good businesses earn decent returns on incremental capital, as a result, maintaining the quality of the overall business.

Lastly, a great business can “earn more with less”, making the overall business a more valuable business over the long term. This situation is usually referred to as operational leverage, as earnings grew at a faster pace than assets. In this situation, reinvestment makes sense, and earning is highly preferred to being retained within the business to grow rather than paying out to shareholders. Alternatively, this surplus capital can then be returned to shareholders through dividend increases and buybacks.

As a result, these names are usually the safest to own but hardest to find as the list of names is usually short and they rarely trade at a discount valuation. Therefore, investors usually reward these companies with a premium valuation compared to the general market or its peers’ group.
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What's happened is that the Fed's moved more toward what the market was pricing, and that's being rewarded by the market in the last couple of days. Good news for market psychology. 

2024 will be a good year, but also challenging. Volatility, economic change and surprises. It's important that investors be well positioned. Owning the whole market will be a little dodgy. You want to be in the right spaces and let the economy reward you through the market.

Absolutely. A month ago, we were just starting to see the beginnings of that. Since then, it's done nothing but broaden out. He's very encouraged by that. 

The Magnificent 7 led most of the performance for the year. Now the other 493 stocks in the S&P are participating. These are unloved, undervalued stocks that represent very good value on their fundamentals. Investors should be there.

Historically, the third year is the best, averaging over 13% growth in the US. The next best is the fourth year, at about 6.5%. 

You can see this as a visual if you go to the relevant e-article at goodreid.com under Insights. It shows that 2023 pretty much represents the historical norm, with a very strong beginning, a mid-summer swoon into the early fall, and then a very strong Christmas rally.

Politicians want to please voters, so as we approach an election, policies that are enacted tend to be voter-friendly. The tough love happens in the first and second years of a presidential cycle.

He doesn't use CDRs, as he likes having exposure to multiple currencies. It's almost like laying on a hedge or another asset class. Canada represents only about 3% of global wealth, so the currency diversification is great for the long term.

If you look at successful portfolios, often the root is in relatively few stocks that have done extremely well. Peter Lynch talked about the pursuit of the 10-bagger. So you stick with them. He points to AAPL. In 2005, he bought in around $2.50 per share, adjusted. It's now $197. A wonderful company for his investors.

The closer you can get to the source of information on a company, the better off you'll be.

Would tend to hold in cash account. Growthier opportunities provide more opportunity for capital appreciation, so you get the benefits of friendlier taxation, as capital gains are taxed at an inclusion rate of only 50%. Hold fixed income and low-growth components in your RRSP.

Yes, we've already started to see it. Healthcare has really been a laggard in 2023. When you compare sector performance with its fundamental growth of around 2.5-3x GDP, there's tremendous value there. That, despite headwinds of impending legislation that might hamper some growth prospects in the sector.

Likes the sector. Will do well with a normalized yield curve, as it enhances net interest margins. Fed signalling interest rates coming down should depress the short end of the curve, with the long end maintaining itself somewhat.

Trading at about a 30% discount to normalized valuations of around 13.5x earnings. That carries through to book value, trading at discounts to historical norms. He owns JPM, BAC, and MS, and that's where he'd put money.

Seems to be. Today's Fed rate announcement is a bit different from the others. Expectation is they'll hold rates, but they'll also be releasing the dot plot, a survey of roughly 20 people who have a say on rates. We'll get a sense of their expectations of interest rates over the next 3 years. 

They release the dot plot 4 times a year. The September one clearly showed a declining interest rate environment. There's less interest in the rate announcement itself than there is in the dot plot, which will be quite telling.

It's the hardest thing for investors. You hear negative things such as a potential recession, but then look at what happened to the markets in November. Putting money in and then taking money out doesn't work. Absolute biggest mistake investors make. 

You have to get in at good prices, and then you have to stay. Who'd have thought November would be so positive, but that's why you have to stay invested. Things can change quickly.

He'd rather buy a great business at a reasonable price, than a marginal business at a great price.

Sentiment is very negative, so valuations are depressed, and that makes him constructive on the sector. With all the technology, scale is so important in being profitable. Being only 8-10% market share in some markets is not profitable enough for a bank, something would need to change.