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COMMENT
Value stocks going forward. He switches between growth and value, depending on where the most upside is. Since vaccines were announced, value has been running the show. That's slipped in the last month with a lot of the cyclicals being hit hard. Tech has come back, but the recovery trade is still in place. They have better valuations and better earnings growth. Tailwinds of monetary stimulus, massive fiscal stimulus, reopening, capital spending. Stock market's come a long way in 15 months and valuations are extended, so a correction is not surprising.
COMMENT
Is current market action just the pendulum swinging the other way? With the reopening trade, that side of the boat got a bit crowded. Some of the growth data started rolling over. China is slowing down the economy to quell inflation, and the Fed might move earlier than expected to slow down rates. What happens when the fiscal benefits run out? The past 2 quarters have been quite a bounce, but we can't expect this to continue, so this took some froth off the cyclical trade.
COMMENT
The question is whether it's the pause that refreshes, or is it the end of the bigger run? It's a pause, with the caveat that it's an extended market. He's worried that there's not as much cash on the sidelines, bullish sentiment is high, and valuations are stretched. A lot of fast, hot money moved in and you have to shake the tree a little bit and see where the stronger holds are. He has cash and is getting ready to redeploy it in cyclicals like financials and industrials.
WEAK BUY
A laggard. New management. Lost market to AMD. Valuations support a chance for a turnaround. He'd be OK owning it, but see his Top Picks today for a way to mitigate risk.
computer parts mnfctr
HOLD
Last quarter was disappointing. Great expansion into Asia. Recent drop in yields has hurt all the financials. Dividend yield, growth, safety. Not everything in your portfolio fires at the same time. Some things you just tuck away and wait. Good company, growing. Yield is 4-5%, better than cash or bonds.
John ZechnerOwned
insurance
COMMENT
US bond market. The advice to sell all equities at 1% would still have a ways to go. Bond market is signalling slower growth ahead, earnings won't be growing as fast as expected. Growth expectations got a bit ahead of themselves. The Fed and money centre banks are still out there buying bonds, so that puts pressure on the yield. Rebalancing at quarter's end also. He's not concerned about the checkback, doesn't think it will last.
BUY
Management's restructured for better earnings control. Engineering service as a fee. Global infrastructure spending will help a lot of the engineering firms.
John ZechnerOwned
contractors
BUY
Global infrastructure spending will help a lot of the engineering firms. This is another good engineering play, mainly out west.
John ZechnerOwned
non-base metal mining
PAST TOP PICK
(A Top Pick Sep 03/20, Up 52%) Likes telecom in general. He sold out into the Rogers bid. If the deal doesn't go through, downside might be 30% or more.
Cable
PAST TOP PICK
(A Top Pick Sep 03/20, Up 23%) He's adding to it. Auto parts producers under pressure, mainly because of the chip shortage. Lightweighting of vehicles by using aluminum. Significant insider buying. Into EV batteries. Well positioned going forward.
John ZechnerOwned
metal fabricators
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