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Stock Opinions by Stan Wong

COMMENT
2023 vs. 2022 Great for most investors to flip the page. 2022 was a perfect storm with the war in Europe, hawkish central banks, soaring inflation, and zero Covid policy in China. Many of these elements will recede in 2023. Inflation, the market's main concern, has really been cooling over the last several months. From here, hopefully central banks around the world will pause the rate hiking cycle into the later part of this year. The economic reopening of China is huge in terms of consumer spending. We've already seen that this year, with travel and leisure stocks moving higher. It should be a pretty constructive year for equities. Going back to 1950, whenever there was a down year in the S&P 500, the next year was positive 80% of the time with an average return of 15%. Plus, we're into the third year of a presidential cycle, another positive statistic with a nearly 90% win averaging a 16.8% return.
Unknown
COMMENT
7 of 11 S&P 500 sectors above 200-day MA? Yes. Signals some good technical strength. If you looked at equal weight (not dominated by AMZN and TSLA) consumer discretionary, it would be 8 sectors. Definitely seeing positive breadth.
Unknown
COMMENT
Investment-grade bonds. We're finally seeing some yield out of fixed income. Corporate bonds are seeing 4-5% yields, plus potential for capital appreciation should central banks around the world pause and actually start to lower rates down the road.
Unknown
COMMENT
Markets ahead. Certainly, there can be more bumps down the road. But it's important for market participants to start to look forward 6-12 months out to understand where the economy will be at that point. With inflation cooling, interest rates pausing, China reopening, he thinks there can be some positive numbers coming out of the markets later this year.
Unknown
COMMENT
Will the beginning of the next presidential election cycle later this year cast a shadow over markets? Not sure. Stats show that the third year of the presidential cycle is the best, and the fourth year isn't too bad either. There will be volatility and bumps along the road. If there's no recession or a soft one, maybe the markets oversold last year and there's an opportunity going forward. Instead of growth, he prefers the value side, which has been outperforming since late 2021. That's why the S&P 500 Equal Weight Index is performing well relative to the S&P 500 Index.
Unknown
COMMENT
Sectors right now? Energy, financial services, and healthcare are his top sectors right now. Energy was a strong winner last year. Still likes energy, it's his largest weighting. Last year's outperformance from energy won't translate to this year, but it will still be one of the better performers.
Unknown
BUY
Basket of the 80 highest-yielding stocks in the S&P, equally weighted. Likes the equal weight, as it avoids the tilt towards the 34% of growthier tech and communication names. Outperformed the S&P for the last 2 years, and in 2022 it was positive compared to a negative S&P. When interest rates pause, dividends will become more important. Yield is 4.9%.
E.T.F.'s
HOLD
Shell plc
In the face of a recession? Energy stocks are still trading higher when you look at the 200-day MA. Still likes and owns. Still sees very steady global oil demand, continues to outstrip supply. In 2022, US drew down 37% from reserves, which will need to be replenished. Oil inventories are generally low. Companies are focused on enhancing shareholder value. Industry-wide underinvestment. China's reopening can be a catalyst as well.
0
HOLD
Suncor Energy Inc
Energy stocks are still trading higher when you look at the 200-day MA. Still likes and owns. Still sees very steady global oil demand, continues to outstrip supply. In 2022, US drew down 37% from reserves, which will need to be replenished. Oil inventories are generally low. Companies are focused on enhancing shareholder value. Industry-wide underinvestment. China's reopening can be a catalyst as well. Over 12-24 months, he still likes the energy sector. 200-day MA still moving along nicely, along with the price still moving higher. Still has potential. With the macro economy looking better, interest rate action, and China reopening, he'd hang on. Yield is 4.8%.
integrated oils
HOLD
Another special dividend? Hard to say. Payout ratio about 30%, which isn't bad but not as low as some others like TOU. All he can say is that it's committed to returning value to shareholders.
oil / gas
BUY
XEI vs. ZWC Great ETF. Basket of high-dividend paying, large cap names in Canada. Pipelines, banks, telecom. Has outperformed ZWC, even though ZWC has a higher yield. What happens is that you get called out of ZWC with the covered calls, so the capital appreciation is weaker. Lower MER. If you think market's moving forward, prefers this unless you need the extra income from covered calls. Yield is 4.5%.
E.T.F.'s
DON'T BUY
ZWC vs. XEI Basket of high-dividend paying, large cap names in Canada, with covered call overlay. Pipelines, banks, telecom. XEI has outperformed ZWC, even though ZWC has a higher yield. What happens is that you get called out of ZWC with the covered calls, so the capital appreciation is weaker. Underperformed the TSX. Higher MER of 72 bps. If you think market's moving forward, prefers XEI unless you need the extra income from covered calls. Already tax-efficient, so efficiencies would be lost in a registered account. Yield is around 6.8%.
E.T.F.'s
BUY
Wells Fargo
WFC vs. JPM Likes its relatively low book-to-value valuation compared to other large US banks. Yield is 2.78%. He likes JPM as well, but he really likes the value of WFC. You want to start to be overweight US and global financials. Improving macro picture, and you're not going to have a bull market without financials. See his Top Picks.
banks
WEAK BUY
JPM vs. WFC Likes WFC's relatively low book-to-value valuation compared to other large US banks, and a yield of 2.78%. He likes JPM as well, but he really likes the value of WFC. You want to start to be overweight US and global financials. Improving macro picture, and you're not going to have a bull market without financials. See his Top Picks.
Financial Services
COMMENT
PYPL vs. SQ - which to sell? Tough. He's significantly underweight tech. Shares of both are in a basing pattern, below respective 200-day MAs. Might be an opportunity, but who knows how long they'll base? Neither shows great technical strength. 3x price to sales, while SQ is 2.2x. More growth with SQ, but PYPL is less volatile and revenue/earnings a bit more predictable. If economy wobbles, SQ is in trouble as it depends on much smaller merchants. Many people have returned to shopping in person, so e-payments are not as popular. Both underperforming S&P. For more stability, keep PYPL. For higher growth but also volatility, keep SQ.
0
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