Market Call Tonight for Wednesday, May 3, 2017
Keith Richards, portfolio manager, ValueTrend Wealth Management of Worldsource Securities
FOCUS: Technical Analysis
There has been an unusual shift out of the leading sectors that drove the market up after the U.S. election. U.S. financials, energy and materials - which participated strongly in the "Trump bump" - are typically in their strongest seasonal period up until about the first week of May. That has not been the case this year. In fact, all three of those sectors have been underperforming since February - an unusual occurrence. As such, we sold our one holding in a mining stock at a small profit recently and look to sell out of U.S. bank stocks within the coming weeks. We are also looking to exit energy shortly. We view the underperformance by these former leading groups as an indication of increasing market risk. At the time of writing, the ValueTrend Equity Platform's cash position is over 20 per cent - and we anticipate being closer to 30 per cent cash in the coming weeks. We continue to hold our top quality tech stocks along with a number of unique stock opportunities in the Equity Platform.
E*TRADE Financial (ETFC.O)
The company recently reported earnings slightly better than expectations. Besides earning commissions from their clients they also generate a significant portion of their earnings from interest income. The quarter's success has led to margin target for the year of 38 per cent being met ahead of forecast. Technically the stock broke out from its downtrend recently-we think it has a few dollars upside in it before we expect to sell.
iShares MSCI Brazil ETF (EWZ.US)
Brazil is the strongest emerging markets economy. The Brazil ETF has an encouraging chart - The ETF broke its two year downtrend in early 2016, and has been in an uptrend since mid-2016 It recently surpassed a prior point of technical resistance (where selling pressure comes in) at around $36/share. Adding to its potential, the Brazilian Real (currency) is in an uptrend vs. the USD, and technically looks to have about 5 per cent upside by itself.
Power Financial (PWF.TO)
PWF is a holding company with three main divisions – Great West Life (life insurance and financial products), IGM (financial services and sales), and Pargesa (European operations). The stock was in a downtrend from late 2014 to mid-2016. It broke the downtrend in late 2016 and has been moving sideways since then. We don’t view this stock as having tons of upside, but it pays a good dividend and should be a reasonably safe stock to hold over the summer. We hold this in both our Equity and Income Platforms. We might be inclined to sell the stock out of our Equity Platform in the fall, while keeping it in the Income Platform.
Past Picks: APRIL 3, 2017
ZUB.TO (BMO U.S. Equal Wt ETF)
- Then: $25.60
- Now: $25.88
- Return: +1.09%
- TR: +1.09%
ZJO.TO (BMO Junior Oil ETF)
- Then: $15.37
- Now: $14.27
- Return: -7.15%
- TR: -7.15%
BX.N (Blackstone Group)
- Then: $29.54
- Now: $30.79
- Return: +4.23%
- TR: +7.15%
Total Return Average: +0.36%
Company Website: www.valuetrend.ca
Fund Profile: ValueTrend Equity Platform
Performance as of: April 28, 2017
- 1 month: Fund 2.6%, Index* 0.3%
- 1 year: Fund 16.9%, Index* 12.3%
- 3 year: Fund 8.8%, Index* 3.0%
- 5 year: Fund 9.6%, Index* 5.9%
- Since inception: Fund 9.6, Index* 6.7%
* Index: “North American Index” which is weighted 85% TSX300, 15% S&P500
* Reinvested dividends
*This performance is gross of fees due to the 2 tiers we charge clients (1.75% for < $1MM accounts, 1.5% for > $1MM account)
* Based on the portfolio holdings of Keith Richard’s own equity portfolio. Inception date - June 30, 2009.
* The rate of return is a time-weighted return.
* For periods longer than 1 year the rates of return are annualized.