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Stock Opinions by Stan Wong

COMMENT
Markets losing ground from the summer rally? Equity markets have stalled mainly in response to a much more hawkish tone from the US Fed Reserve. We've given up almost half the gains from the June lows. YTD, energy has been the star, up over 40% for the S&P 500 and 23% for the TSX. Tech, communication services, and consumer discretionary have been the laggards. Continued choppiness over the very near term. September is usually the toughest month, being a winner only 45% of the time since 1950. Further ahead, seasonality can improve sooner rather than later during a presidential cycle. Usually Q4 of a mid-term election year signals above-average returns. From a seasonality and technical perspective, investors can look to better times ahead.
Unknown
COMMENT
Favoured sectors right now. Energy, healthcare, and financials. Energy has a major supply/demand imbalance, along with major under-investment over the years. So pricing can remain pretty firm, with demand steady. Healthcare has that combination of growth, defensiveness, and dividend yield. Financials are fairly inexpensive, both insurers and banks, and provide great income through their dividends. They tend to do well at the beginning of a cycle, and he may be a bit early, but he's being paid to wait with those great dividends.
Unknown
COMMENT
Inflation. The principal concern for markets today. We're seeing a lot of encouraging data that indicates we may have hit an inflection point. Gasoline, oil, copper, and wheat have retreated pretty sharply from their summer highs.
Unknown
HOLD
He continues to like it. Since August 2020, it's outpaced the S&P 500 by 42%. 56% energy and 28% financials, 20% in materials. He likes all these sectors. Expects yields to be upward-trending until next year. Yield is 3%.
E.T.F.'s
WAIT
Tends to outperform in the early part of the economic cycle. A bit early to build a position. 28x forward earnings for a 10% growth rate, so bit of a valuation premium. Recovered to the 200-day MA, and this could be resistance, so be careful. Commodity and wage increases, and labour shortages, are challenges. Yield is 2.2%.
food services
WAIT
Struggling. If you own it, too late to sell, so hold on. Airport delays, higher fuel costs. Under the 200-day MA, which is trending downwards. Wait for more stability in the economy to start a position.
Transportation
BUY
Trading at 200-day MA, a potential support level. Serious imbalance with supply/demand. Russia-Ukraine situation will affect supply, which should firm up prices. 12% dividend increase, doubled share repurchase plan. Free cashflow yield is very strong, about 16-17%. Yield is 4.7%.
integrated oils
BUY
Why so much volatility? Tied to the price of commodities like wheat and corn, and commodities tend to be more volatile. Beta is 1.1, so only a bit more volatile than the TSX. Longer term, the decline in arable land will force increased production with products from NTR.
agriculture
COMMENT
Long-term theme of food. Longer term, the decline in arable land will force increased production with products from companies like NTR. Countries like China and India are keen to secure their food supply. Food should be a major theme in portfolios.
Unknown
COMMENT
Covered call ETF vs. non-covered when markets rise. In general, when markets are moving higher, a covered call ETF will lag a regular ETF in total return. A covered call ETF performs best when you see markets or the underlying positions being flat or slightly negative. The benefit is for investors who need income, as you get the dividends plus the premiums from the covered call. Some of these strategies are paying upwards of 7-8% yields today. That's great, though it may not be as high a total return as if you owned the underlying security. Covered call ETFs are also very tax efficient, as most of the income is considered dividends or capital gains.
Unknown
WAIT
Decent 3.7% yield. When rates rise, telcos tend to be weaker, as their dividend yields look less attractive. Long term, he likes it. Still runway for growth, plus it has the media. Wait till it gets above the 200-day MA to confirm it's in a new buy trend. He owns BCE.
Cable
PAST TOP PICK
(A Top Pick Sep 15/21, Down 26%) E-commerce has struggled due to inflation and resurgence of physical stores. AWS continues to gain traction, now about 1/3 market share of cloud infrastructure. Ad business scales quickly, which will continue to boost margins. Undervalued. 2-3 years out, a great name to hold.
specialty stores
PAST TOP PICK
(A Top Pick Sep 15/21, Up 46%) Diversified global basket. Likes energy. Increased demand, diminished supply. Strong balance sheets and free cashflow. Disciplined management. Valuations still look cheap. Yield is 4.2%.
Oil and Gas (Integrated Oils)
PAST TOP PICK
(A Top Pick Sep 15/21, Down 5%) Exited because of concerns over impact of rising rates on consumer. Might consider again in early stages of next economic cycle.
other services
WAIT
Yield of 4.7%, growing about 6.5% over the last 5 years. With rising rates, the dividend looks less attractive. Dropped below 200-day MA, not a great technical sign. Wait for sustained momentum above 200-day MA. A keeper over time. He owns BCE instead.
telephone utilities
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