Yesterday we looked at the top picks for the TOP60 portfolio of Ron Meisels, the technical analyst for Phases and Cycles Inc. Today, we'll look at what stocks to avoid.
Mr. Meisels writes a technical analyst feature for the Saturday Report on Business and is also the analyst behind the stocks in Horizons AlphaPro Managed S&P/TSX 60 exchange traded fund. The ETF is based on his TOP60 portfolio.
More about the TOP60
Mr. Meisels uses technical, cyclical and sentiment indicators to pick stocks in the S&P/TSX 60 index that he thinks will outperform. First, he uses a top-down methodology to pick sectors he thinks will outperform, then he uses a bottom-up approach to pick stocks in the favoured sectors.
Naturally, for the fund's bottom-line performance it is just as important what stocks he throws out. The overweighted TOP60 stocks during the past two, five and 10 years have had a compound annualized rate of turn of 17 per cent, 6.5 per cent and 3.2 per cent, respectively; the underweighted stocks were up only 1.5 per cent, 0.6 per cent and 0.3 per cent during the corresponding time periods.
More about performance
But the past year has been tough for all investors and it was no different for Mr. Meisels. His TOP60 portfolio declined 24.8 per cent, compared with the 21.6-per-cent decline in the S&P/TSX 60.
“Yes we learned a lot of lessons,” Mr. Meisel said. “Fear overcame reality and people were throwing away stocks that they should have kept.”
The zero-weighted stocks in the current portfolio include Canadian Tire Corp. Ltd., which was sold off because of its “double top,” and Rogers Communications Inc. and Canadian Pacific Railway Ltd., which are not keeping pace with the market.
“We are very much aware of stocks breaking out and breaking down,” Mr. Meisels said.
