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Stock Opinions by Larry Berman CFA, CMT, CTA

COMMENT
Carney-Trump meeting will reduce uncertainty?

Not a chance. Mark Carney has business acumen in terms of his positions at the BOC and BOE during 2 great financial crises. He understands fiscal conservatism and the importance of doing a good trade deal here for Canada.

But the issue is more on what does the US president ultimately want out of this. And that's not clear to Larry. Trump says that the US doesn't need any more oil from Canada. Is he kidding? Of course they do. The president says things, and you just have to shake your head.

So we're not going to get a deal in the short run, though we might get an agreement to have a deal. Everybody wants a deal to clean up the mess that Trump started. Historically, it takes 18 months to get a solid trade deal done. So in the next 45 days, before the 90-day window expires, a deal is extremely unlikely. Though there will be talks within that window.

COMMENT
CUSMA.

Doesn't think it matters that current agreement failed to deliver dairy and lumber agreements that US wants. Trump's taken this tack largely for the implications against China. To say that this is an emergency because fentanyl is crossing the Canada-US border is asinine. 

There are some cases before the courts right now that argue that what he's doing right now is not legal in terms of his powers. That could be an issue.

BUY
CGR vs. ZRE vs. VRE

CGR is a global REIT play. ZRE is an equal-weight REIT play. VRE is market-cap weighted.

There isn't a right way, one's not better than another. Looking back in history, in Canada the equal weight has been better than market-cap weighted. That's as a result of some of the smaller REITs doing better than some of the larger ones. Domestic REITs have better tax treatment than global ones. So it depends on whether you're investing in a Canadian taxable account or not. There are a lot of great global REIT dividend plays, but you have to consider the foreign withholding tax.

Any one of these is a great vehicle, but which one will depend on an individual investor's need for exposure and tax situation.

BUY
CGR vs. ZRE vs. VRE

CGR is a global REIT play. ZRE is an equal-weight REIT play. VRE is market-cap weighted.

There isn't a right way, one's not better than another. Looking back in history, in Canada the equal weight has been better than market-cap weighted. That's as a result of some of the smaller REITs doing better than some of the larger ones. Domestic REITs have better tax treatment than global ones. So it depends on whether you're investing in a Canadian taxable account or not. There are a lot of great global REIT dividend plays, but you have to consider the foreign withholding tax.

Any one of these is a great vehicle, but which one will depend on an individual investor's need for exposure and tax situation.

BUY
CGR vs. ZRE vs. VRE

CGR is a global REIT play. ZRE is an equal-weight REIT play. VRE is market-cap weighted.

There isn't a right way, one's not better than another. Looking back in history, in Canada the equal weight has been better than market-cap weighted. That's as a result of some of the smaller REITs doing better than some of the larger ones. Domestic REITs have better tax treatment than global ones. So it depends on whether you're investing in a Canadian taxable account or not. There are a lot of great global REIT dividend plays, but you have to consider the foreign withholding tax.

Any one of these is a great vehicle, but which one will depend on an individual investor's need for exposure and tax situation.

BUY

Base metal investing, in general, is very cyclical. Very rarely a long-term growth story that you buy and hold. That applies to base metals and precious metals. They can go through months or even years where they're doing great, and then they'll be out of favour for months or years. When the global economy's slowing, these things cheapen up quite a bit. Already at the low end of the range, though could get cheaper if we hit a recession.

This one's a great company and operator. Right now, particularly good value. He's been buying VALE for his portfolio, but GLEN fits the bill too.

BUY

Base metal investing, in general, is very cyclical. Very rarely a long-term growth story that you buy and hold because you always want to be there. That applies to base metals and precious metals. They can go through months or even years where they're doing great, and then they'll be out of favour for months or years. When the global economy's slowing, these things cheapen up quite a bit. And if we go into recession, they'll cheapen up even more.

He's been buying for his portfolio. Already at the low end of the range, though could get cheaper if we hit a recession.

COMMENT
Price of gold going above S&P 500.

S&P right now is 5600-5700. The gold bulls have always been painting this "gold's going to $5000" story. Gold falls into the category of base metals -- at times the performance will be great (like now), and then the performance will be terrible (possibly for years).

Right now, the trend is higher and momentum's up. On the short term, he's more of a seller here. But he's been saying this since it hit $3100-3200, so he's been wrong for the last 400-500 points or so.

So you won't see them cross anytime soon. He'd be buying dips in precious metals because of the dynamics in the world today. Don't chase strength, but buy into corrections.

COMMENT

At his firm, they actually trade the underlying futures contracts as opposed to using the ETF. There are a number of ETFs to go net-long, go net-short, and to leverage on those plays. He can't recommend one, because he doesn't use them.

When you're using the leveraged ones, there's lots of potential adrenaline. They should only be used for very, very short-term views, days to weeks at the most. Never want to hold any leveraged ETFs beyond a few months because of the way they rebalance (buy high and sell low).

COMMENT
What explains its tremendous performance?

Good operational management long term. Stock's more than doubled in the last year and a half, and he'd have to dig to find out why. Value, instead of growth, has been in favour for the last 6 months or so. Its counterpart, BRK.B, has also done well (but not doubled).

If he finds an answer, he'll be sure to post it on social media.

HOLD
Investor is 62, planning to retire in 2 years. Down almost 50%, 7% position in the portfolio. Dollar cost average down?

7% in one stock is way too overweight. Expects to see a haircut on the dividend. Management hasn't been making the best decisions over the last year or two. He's been in this name since mid-$40s, not happy, but hasn't exited.

Instead, use ZWU.

BUY

For dividend seekers. Gives you exposure to great Canadian dividend payers like telcos, utilities, pipelines. Lots of diversification, so when a BCE has a bad run you're still generating income.

WAIT

Typically you'll get a lot of big-cap tech in this. Loves the exposure and quality as a factor (one of his favourites). Recent lows would've been a better buy than today. Don't chase here with new money, as there's a chance we revisit April lows if we get a harder economic landing (which could take several quarters to figure out). If we revisit those lows, buy then and be happy in 4-5 years.

BUY ON WEAKNESS

Look at the 5-year chart. The peak in 2021 concerns him on valuation. Not surprising that it came into resistance when it entered a similar window earlier this year. Likes buying dips, don't chase here.

COMMENT
Educational Segment.

Portfolio Style

Warren Buffett's retiring at 94 years old. Larry's in his 39th year as an investment professional right now, and he's jotted down some things he's learned.

Market timing is very hard. Buffett always makes fun of technical analysis and charts, but he does market timing through more sophisticated metrics.

Diversification is critical. Concentrated portfolios are much higher risk.

Periodic rebalancing is prudent. Buy when there's blood in the streets. When the economy's in a recession, he's looking to put cash to work. In 1998-2002, Buffett was putting money to work, but in value stocks and not what was leading the S&P. After the dot-com bubble burst and interest rates went to zero, Buffett started using a lot more leverage to invest. Only in the last decade or so did Buffett buy into AAPL and growthier names.

Long-term focus is needed, but hard to execute.

Most important is your portfolio construction.

In the current Buffett portfolio, we can draw these lessons:  leverage is relatively low (costs more to borrow now); cash is very high; seems to be waiting for some blood in the streets (saw a bit of that in April); better value internationally using strong USD to buy cheaper assets globally (bought a lot in Japan). He's being cautious. Over 20 years he hasn't outperformed the S&P 500, but he's done great compared to balanced funds.

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