John Stephenson is president and CEO of Stephenson & Company. His focus is global equities.
Top Picks:
*Short* Petroleo Brasileiro (PBR.N)
Disproportionately high debt levels – oil should continue to be weak.
*Short* Teck Resources (TCKb.TO)
Commodity weakness – high forward earnings valuation.
Cash
There is more downside to the market – investors should be defensively postured.
Past Picks: October 29, 2014
KKR & Co. (KKR.N)
New comments: We still hold KKR and view this as the cheapest publicly listed alternative asset manager. Their franchise is well-positioned for improving global equity prices.
Then: $22.25 Now: $16.52 -25.75% Total return: -20.15%
WestJet Airlines (WJA.TO)
New comments: We sold our position in WJA between Feb. 19 and March 17 at around $30. While we think that it was a very attractive stock with inexpensive valuation, the airline stocks had already ran and there were fewer obvious catalysts once OPEC had maintained their production quota on Nov. 27.
Then: $31.58 Now: $23.99 -24.03% Total return: -22.56%
*Short* Kohls (KSS.N)
New comments: We covered our short on Dec. 17 and 19 at $57.70. While we think that KSS is still in a weak competitive position relative to off-price retailers and it continues to struggle to secure compelling national brands for its assortment, the trade wasn't working out as well as we hoped and therefore we covered our short position.
Then: $54.44 Now: $46.11 +15.30% Total return: +12.81%
Total Return Average: -9.97%
Market outlook:
Markets have been struggling over China growth fears and the implications for a dramatically slower global economic growth. The confusion over the direction of Fed policy has only added unnecessarily to the negative sentiment in the market. Meanwhile a zero-interest rate policy has encouraged speculators to drive up asset prices. For investors, better days are around the corner, but the situation will get worse before it gets better. The best bet is to sit on the sidelines until the dust settles.