Employing the buy-and-hold strategy advocated by Berkshire Hathaway CEO Warren Buffett or passive investing in exchange traded funds will not work in the uncertain era of U.S. President-elect Donald Trump, according to Cameron Hurst, chief investment officer at Equium Capital Management.
“If 2016 taught us anything it’s that you can’t just simply buy-and-hold anymore; you have to be sector specific,” he said in an interview Friday. “You can’t just take that age-old Buffett approach of sit back and buy high quality companies with a big dividend. Things have changed. ”
Passive investors were unable to capture the recent outsized – and unexpected – returns from the TSX, Hurst noted. “Some people – the active managers -- repositioned, wisely. Most people sat there and watched a give and a take and it moderated returns and they ended up at the end of the year disappointed.”
Equium’s combination of technical and fundamental analysis convinced its investment team to change their underweight position on Canada early in 2016. Hurst said that helped them benefit from the outsized returns posted by the TSX last year.
Even active managers can miss out on returns if they are unprepared to act quickly, he added, warning some investors become too emotionally invested in a stock and are reluctant to move: “If it slips a little bit we want to give it the benefit of the doubt… Buffett would wait.”
Hurst said he is bullish on Canada’s fortunes for 2017. He thinks the TSX will move higher, fueled by a continued recovery in the energy sector and strong returns from industrial stocks. “Right now it’s all on forward – full speed – in Canada.”