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

Tech Stocks. When he calculates their fair market value, they are roughly fifty percent over valued. He does not recommend moving into them. Meanwhile with the value stocks and the market coming on, you have plenty of place to go. When these stocks lose altitude, it takes years, if ever for them to come back to their highs.

Despite a sell-off today, the market continues to focus on the positive, not the negative (i.e. more political unrest in Washington, Bitcoin down 21%, Covid). Monday saw a weak opening, but buyers then grabbed stocks. Retail stocks, for instance, continue to rise, because investors see the positive--the future re-opening--despite line-ups to enter shops like Best Buy (which limits sales and irritates customers).

There's no shortage of uncertainty in the market. The big concern is valuation and where markets can go from here. The uncertainty will not change, but there are pockets of value. Energy infrastructures, financials and REITs offer good sources of value. Hyper-growth stocks have been bid up to extreme levels. We must not paint the market with a broad stroke. There are pockets of excesses but there are others of reasonable valuations.

The deep cyclicals do not interest him. There are some moderate cyclicals that are interesting. Cineplex for example, who was hit by the pandemic, is too speculative right now. It is leveraged and extended. Airlines are also too speculative at this time. Be defensive and focus on valuations. Pick companies that will do well regardless of how the economy weathers the pandemic.

Is the market divorced from reality? Today we saw an ugly employment number, yet markets broke records. And Covid is running wild and we're doing a poor job distributing vaccines. Bad news is good news, because it will lead to more stimulus cheques. A slow economy + dovish Fed = prolonged moves higher, like Tesla vaulting 8% today to another new high. Stocks are the only game in town.

What lessons have we learned since last time the market peaked? 2020 has taught investors that it's time in the market, not timing the market, that makes for investor success. Micromanaging your investments runs the risk of seeing the trees instead of the forest. Patience and a steady even hand are important to ensuring investor success over the long term.

How long would it take Shopify to earn profits to match its market cap of $180B? It flashes a red light. He owned from 2016-18, and very profitably. It's gotten manic since then. Trades at 300x earnings, so it would take 300 years to earn its market cap. On the cusp of a new year, he's constructive on value and cyclical stocks, after a decade of being outshone by the growth stocks. Things are falling into place, and we should see a rotation this year.

Definition of "taking a position" in a portfolio. A lot of the glory goes to stock-picking, but position size is really important. Full position means the intended ultimate target weighting in the portfolio. He manages about 20 stocks, of equal weighting, and so the default position size is about 5%. If you hear about a half position or legging into a trade, this means they might be waiting to develop more conviction or for something to happen. They might start out with 2.5%, and then buy the rest of the position. He tends to do his homework up front, and buy a full position all at once There's more than way to skin a cat, and there's nothing wrong with taking a half position first.

How can markets high record highs today after yesterday's siege debacle? Does Wall St. like violent confrontation? Markets aren't a referendum (on what happens on the streets). Rather, there were more buyers than sellers on the market today. That's the answer. Stocks are the only game in town to pay you a decent return. Buyers. Also, a lot of trading is done by algos (machines) which don't care what happens in the streets.

Investor's dilemma: Biden will make it harder to drill for oil, which will raise oil stock prices. Oil companies don't want that. He expects money managers will sell off oil stocks this year to please their investors. As climate change gets worse, oil and gas stocks will get worse. Lesson: regulators can crush the demand for oil, like they have for coal.

With low interest rates, has too much money piled into dividend stocks? Doesn't think so. Low rates have made people take multiples up on growth stocks. Dividend stocks are typically in the value space, so they've been left behind. Could be a year where dividend stocks see some positive performance for two reasons. One, growth to value rotation that started in November. Dow is outperforming Nasdaq, TSX is outperforming S&P. Two, still have low interest rates. Dividend payers could be in the sweet spot this year.

What sectors have the most attractive dividend growers? Renewable space, as they have a higher growth rate, plus will benefit if the Senate flips. Valuations have run away, but dividend growth has been and should continue to be stronger. Electric utilities, with dividend growth and the election being positive for distribution utilities. Finally energy infrastructure, despite a terrible year, has the most value. Pipeline space is beaten down, but has pretty solid cashflow, dividend growth, and earnings metrics.

Canadian renewable stocks. Good way to get global exposure to a growth sector, but with a Canadian listing and the dividend tax credit. The sector is worth looking at despite the rise in valuations.