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Stock Opinions by Stan Wong

COMMENT
Are market fears justified? Wild ride this week. Markets jumping yesterday, but giving up those gains and more today. VIX is now at those critical levels of 30 or so, which tend to show an inflection point in the market near-term. Lots of fear and panic due to geopolitical tensions, rising rates, inflation, and renewed lockdowns in China. April was a tough month for markets all around, especially the NASDAQ. When we see these major swings, as we saw in March 2020, it's an opportunity if we can look beyond the near-term noise. Heed the Warren Buffett adage: Be fearful when others are greedy, and greedy when others are fearful.
Unknown
COMMENT
Every challenge has opportunities. Where are they right now? He's been tilting his portfolios from growth, especially high growth and high multiples, over to value. The global economy will expand at 3.6% GDP expansion, based on recent numbers from the IMF for 2022-23. The volatility is caused by the chatter about recession, which is premature and overstated. Look at the Conference Board leading economic index and the US 3-month/10-year yield curve, which is highly predictive of a coming recession. Neither of those predict a US economic downturn in the next 12 months. Manufacturing numbers, retail sales, and housing numbers still look encouraging. Sectors he likes now: financials, energy, materials, healthcare.
Unknown
BUY
Tilted to value, preferable now with rising rates. About 37% financials, 15% energy, 13% communications. 72 bps expense ratio. Likes the strategy. Makes sense for the extra income. Yields about 6.2%.
E.T.F.'s
DON'T BUY
Similar to AGG, one of the largest in the US. Down about 9% YTD, all about interest rates moving higher. Duration of 6.5-6.6 years, so rising interest rates will have a negative effect on the pricing. 18 bps for this version. AGG is only 3 bps. You don't really need to hedge the CAD these days. Not a fan of long bonds today, as rates can push higher. He prefers short-duration or inflation-protected bonds, like the XSTP.
0
BUY
Not a fan of long bonds today, as rates can push higher. He prefers short-duration or inflation-protected bonds, like the XSTP.
0
BUY
Short-duration of 3-4 years corporate bond index. Has held up better than aggregate bonds, but still not great. Short bonds or inflation-protected ones are the right strategy, as they don't carry the same rising interest rate risk. Much of the damage is done for downward movement in bonds, though there might be more to come. Yield is 3-3.2%.
E.T.F.'s
COMMENT
Time for GICs? Rates are definitely moving higher. The only problem with them is that there is no exit until they mature. No liquidity. Whereas you can get out of bond ETFs today or tomorrow. You'd want to be at the 3-year mark at the most. It becomes a choice of what the investor is looking for. 3-year GICs are about 4%, and 1-year GICs are around 3.1%. Is that difference worthwhile locking in? He's not so sure. If you wait for rates to go higher in shorter rates, you're not getting that yield in return, so there's an opportunity cost along the way.
Unknown
COMMENT
Holds non-traditional utilities like Canadian pipelines, plus BCE and Telus, Verizon, US pipelines. Covered call can boost income up to 7% here. When markets move higher, covered calls lag. Does really well in a flattish market, compared to owning the underlying securities. Good for people who want income, not necessarily looking for the capital gain.
E.T.F.'s
DON'T BUY
Tim's is still restructuring. Stock looks a bit rough. 200-day MA moving down, share price down too. Oversold, with RSI below 30. Expects a short-term bounce. It will take time to get outsized returns. Wage and labour pressures. He's not interested in this name, and the industry is cautious. Nice dividend of about 4%, secure.
food services
BUY
Likes financials, sees value. Worry out there about recession and interest rates. As long as the economy continues to plug along, banks on both sides of the border are an opportunity. Fairly well run. Concerning that shares have fallen below 200-day MA. Should increase share buybacks and dividends. Great yield of 2.3%.
banks
PAST TOP PICK
(A Top Pick May 19/21, Up 0.2%) Forecast earnings growth of 22%, 15% revenue growth. Rotation from tech into other areas. 6.3x price to sales, so valuation is a bit high. Disappointing earnings call. Weak YouTube results are temporary. Growth in cloud is phenomenal. Usage online will continue to increase online. Android is gaining market share. On his probation list right now, as he's cautious on tech.
Business Services
PAST TOP PICK
(A Top Pick May 19/21, Down 3%) Strong quarterly earnings, upped guidance. Huge pent-up demand. Sunny skies ahead. People in Europe are travelling, and most revenue comes from there. It will be a higher beta name based on news headlines.
department stores
PAST TOP PICK
(A Top Pick May 19/21, Down 1%) Improvement in cross-border transactions should pick up. Ukraine conflict poses a risk to European spending. Covid drag in China will also end at some point.
other services
DON'T BUY
Basket of tech names. SHOP numbers are down dramatically again today. XIT is at another 52-week low. Pretty cautious on tech market. TSX tech names are cheaper than US S&P, but still not cheap at 4.3x price to sales. Early pandemic winners are now the late pandemic losers. Don't add. Rising interest rates don't bode well for this kind of investment. There may be a bounce, but do you want to hold for the next 2 years after that?
E.T.F.'s
SELL
Cautious on tech, reducing some of his names and putting the rest on probation. Price to sales ratio is 4.25x, not cheap, overvalued. Rising rates won't do it any favours. He'd be pretty fearful, wouldn't be adding. You'll see fantastic bounces when the market turns, but if you're not trading it and holding instead, he'd be careful.
E.T.F.'s
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