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Stock Opinions by John Hood

COMMENT
Markets so far this year.

Somewhat over-optimistic. A lot of the interest rate hikes have not been priced into earnings yet. We still could see a bit of an earnings recession in the last half of the year, followed by good news the following year. We could still see some weakness of 10-12%.

Unknown
COMMENT
Earnings recession driver.

If the government is going to achieve its inflation target, it's going to have to increase rates more. You can't get inflation down without there being a slowdown in the economy in general. 

The Fed has signalled it's going to increase 2 more times this year. Increase in rates is going to harm the overall economy. Not disastrously, as it's not 2008, but it will impact earnings.

Unknown
COMMENT
AI rage and psychology of investors.

We're seeing all this enthusiasm for AI, and it's reminiscent of last year when everyone was chasing meme stocks. Same kind of mentality. A bit different from 2000, because a lot of those companies weren't making money. Whereas the AI ones already are. 

It's the old FOMO, with people chasing and trying to get on board.

Unknown
COMMENT
Pullbacks are opportunities.

Look at certain core positions that you hold. In his case, he's always overweight the US market, simply because it has the greatest breadth and depth of any market on the planet. So it's always a core position. He very rarely sells his core positions, but looks to add on any kind of weakness, and that's what he's doing now.

Unknown
DON'T BUY

A covered call on banks, which is similar to ZWB. The difference, however, is that Mulvihill uses leverage of 25%. He doesn't buy anything that uses leverage or margins, as there's too much risk to clients who are retired or soon to be. Nothing wrong with it as long as you're willing to accept the risk.

0
COMMENT
A Comment -- General Comments From an Expert
HISA ETFs.

There are quite a number of these high interest savings account ETFs these days -- some from Purpose, BMO, Horizon, and others. He was buying these quite a lot a couple of months ago, and he still holds some. But he became concerned when OSFI stated that it was concerned about these ETFs and liquidity issues if there was a run on Canadian banks similar to SVB in the US. This was a warning flag. It wasn't a big risk, but he wasn't completely comfortable with them, so he sold most.

Instead, he moved into Government of Canada treasury bills. There's a slight discount to the rate you get, but there's a lot more safety.

Unknown
COMMENT
Market weight or equal weight for ETFs?

He prefers equal weighting when it comes to, let's say, Canadian banks where there are only 6 of them. Otherwise, when there's a large number of stocks, he's much more interested in market cap weight. 

Unknown
HOLD

Around a long time. Introduced as a capped product, because its predecessor was at market weight and 40% of that was Nortel. 

Core Canadian holding. He hasn't been buying lately, because he's overweight the US market.

E.T.F.'s
BUY
Why was distribution reduced?

Not sure why in this particular case, but it could be because the premiums from the covered calls were not as good. Or it could be that the prices of some of these utilities have gone up. 

You buy this for yield. Utilities are very susceptible to changes in yield. They pay high yields, but it can come back and bite you. This is a pretty solid performer, and the covered calls give a really good boost. He's very much in favour of covered calls.

E.T.F.'s
COMMENT
Why can't you write a cash-secured put in a registered account, buy you can do a covered call?

The basic reason is because the CRA won't let you. They don't allow naked call selling either. In both cases, you're dealing with cash and not a security. CRA views naked put writing as essentially an ongoing business, rather than dealing with a security.

In non-registered accounts, people use naked put writing to generate income. It's all supposed to be cash secured, but he's met people who leverage it 2-3 times. If things go the wrong way, they get clobbered. That's one of the reasons that CRA doesn't want it in registered accounts.

Unknown
BUY
VCN vs. VDY

VCN is an all cap with about 175 stocks. VDY focuses on dividend payers, so it has banks and oil and the like. 

The choice is do you want basic growth or do you want income? VDY for income. VCN for more growth and better diversification.

E.T.F.'s
BUY
VCN vs. VDY

VCN is an all cap with about 175 stocks. VDY focuses on dividend payers, so it has banks and oil and the like. 

The choice is do you want basic growth or do you want income? VDY for income. VCN for more growth and better diversification.

E.T.F.'s
COMMENT
Analyzing an ETF.

When people looks at some of these ETFs, they usually focus on the dividend yield. He always says "never trust yield", because there's always something going on if the components have a lower dividend yield than the actual yield of the ETF. 

Some companies like Harvest often use leverage to achieve their ends. That doesn't suit his perspective for clients. There's nothing wrong with it, if that's what you want.

Unknown
BUY
ZQQ vs. HTA

He'd be more cautious of HTA, because if he's going to take the risk of tech, he wants to have the full growth potential of that and not be somewhat coralled by covered calls. On tech, he'd be doing ZQQ.

E.T.F.'s
DON'T BUY
Tech Achievers-A
HTA vs. ZQQ

He'd be more cautious of HTA, because if he's going to take the risk of tech, he wants to have the full growth potential of that and not be somewhat coralled by covered calls. On tech, he'd be doing ZQQ.

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