Keith Richards is portfolio manager at ValueTrend Wealth Management of Worldsource Securities. His focus is technical analysis.
Top Picks:
BCE (BCE.TO)
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BCE had been trading in a sideways range from $52-$56 since early 2015. The strong breakout in early October gave us the signal to step in at $56. Recently, the stock pulled back to just above our buy point – a typical neckline breakout test. We viewed this as a buying opportunity on the stock for those who missed it in October – which is why I mentioned it on my Nov. 5 BNN Market Call appearance. I still like it at the current price – it has lots of upside potential. This strong household name has a diverse business model that should continue to benefit from the unique regulated environment they enjoy. Wireless has provided decent growth that we expect to continue. Although the Media division has been challenged, the Wireline predictability provides a cash flow stream that is significant. Recent investments the company has made should positively impact the stock going forward. We may hold this one for a while.
Cinemark (CNK.N)
This is a brand new position for us. We just bought on Monday at pretty close to $36 even. The stock had been in a downtrend through much of this year, but broke the trend line. We feel it could get into the $45 area again. The company has been expanding its presence in Latin America. Interestingly, despite the onslaught of cheap home access to movies via the internet and iTunes, etc., people still like a "night out" in the theatre – where they willingly pay for high-profit confectionery treats and then endure high-profit pre-movie commercials. Bless the North American consumer!
Chemtrade Logistics Income Fund (CHE_u.TO)
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This is a stock we hold in both our Equity Platform and our Income Platform. While the Income Platform has a mandate for achieving a predictable income stream with less turnover, our Equity Platform, as many of my regular followers know, is very actively traded – well over 100% turnover in some years (such as 2015!). Its mandate is to meaningfully outperform the stock market with minimal drawdowns. As such, we would look at CHE.UN within the Equity Platform as a current trade to SELL as/if/when it reaches its old support point at around $19.50. Long termed current support around $17 presents a favourable entry point on this high dividend stock (6.7% yield) for both a trading-orientated investor, and for longer termed income orientated investor. We will sell it out of the Equity Platform at our target, yet "hold" the stock in the income platform even as it reaches that target price.
Past Picks: September 30, 2015
Home Depot (HD.N)
NEW COMMENTS: We never bought it. Good stock, good sector, but we ended up overweighting the technology sector instead of adding this one to our portfolio.
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Then: $115.49 Now: $126.86 +9.85% Total return: +9.85%
BB&T Corp (BBT.N)
NEW COMMENTS: Still own, still target $40-$41/share where we will sell it.
Then: $35.60 Now: $38.54 +8.26% Total return: +9.02%
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Alphabet (GOOGL.O)
NEW COMMENTS: Still own it—will hold it until it shows technical underperformance – we will keep a very close eye on it after its 'seasonally strong" period ends in the early winter for technology stocks.
Then: $638.37 Now: $759.94 +19.04% Total return: +19.04%
Total Return Average: +12.64
Market outlook:
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On Nov. 5, I noted the following:
"It is my belief that the S&P will eventually blow through its old highs of around 2,130. But after such a significant ride from the double-bottom low of September, it is time for a pause. In fact – that wall of resistance at around 2,130 may lead into a new level of sector rotation as the market struggles to break it. For this reason, I recently took a little off of the table (10% cash) in my equity platform recently after becoming fully invested in that first week of October."
The market did correct, as suggested, and we invested half of our noted cash in one of today's top picks.
The current environment calls for active market, sector and stock rotation. The investment industry sometimes propagates the theory that you always have to be fully invested, and you should avoid portfolio turnover. We don't agree. It is our opinion that markets, sectors and stocks will change leadership rapidly in the coming months and years. Specific examples of rotating strength in the past year or two have been:
- Health care and pharmaceutical were strong in 2014 and early 2015, now weakening.
- Energy was strong in 2013 & 2014, has been weak since the final quarter of 2014.
- Canadian banks were strong in 2014, turned weak in 2015, and are now returning to strength in late 2015.
- Consumer staples were strong for 2013 right through to late summer of this year, then became weak in the fall.
- Technology, U.S. banks and consumer discretionary stocks have rotated back and forth in strength over the past year.
Investors who do not rotate between sectors and even out of the market occasionally – as we did in May of this year – will likely experience frustration in the current environment.