Keith Richards.
Keith Richards is portfolio manager at ValueTrend Wealth Management of Worldsource Securities. His focus is technical analysis.
Top Picks: We own none of these but expect to buy very, very shortly!
Home Depot (HD.N)
Seasonally, the home builders come into play in October until the end of the winter. We like the sector in general. Add to that a touch of the long-termed trendline by this stock, and you are looking at an opportune buying time for this leading retailer in the home builder's space. Home Depot's revenue is largely based in U.S. dollars – an added bonus given our continued bullish outlook on the USD.
BB&T Corp (BBT.N)
This regional bank largely focuses in the retail space on the eastern side of the U.S.. They are growing though acquisitions and creating efficiencies through these acquisitions. The stock has been trading in a flat range – swinging from $35 - $40 since early 2014. Currently it sits right at the bottom of the range, making it a good bet for a short termed swing back to $40 over the winter. We'll probably sell it around that price point, and will enjoy its 3 per cent dividend along the journey.
Google (GOOGL.O)
A wonderful breakout by this behemoth, whose mission is to own the internet. Their continued move into mobile while maintaining its core business via the search engine and YouTube etc. make it a growth stock. It's the ideal time to buy at the bottom of the consolidation after this summer's breakout. Technology stocks in general tend to do well from October until well into the new year. The wind is behind this stock's sails.
Past Picks: August 24, 2015
We own all three of these positions personally, in-family and professionally at this time, although we expect to sell the two ETFs very shortly.
Utilities Select Sector SPDR ETF (XLU)
New comments: This sector play held its own during the market malaise this summer. It pays a 3.6-per-cent dividend, and is currently right around our buy price. We will be selling it shortly, and rotate into favoured sectors and stocks
Then: $43.37 Now: $43.29 -0.18% Total return: +0.76%
iShares Global Agriculture (COW.TO)
New comments: This sector ETF has been a disappointment. We originally bought it at $32.50 as it bounced off of a trading range that held it between $32 - $34. Seasonals become favourable for the sector in August, but the sector was pounded by underperformance from stocks such as Deere and Archer Daniels. Technical support at $30 was recently violated, and we expect to sell this stock this week at a loss. This is a good example of disciplined trading – sometimes trades don't work the way you wish, but a discipline will save you from holding onto a losing position for longer than necessary.
Then: $30.78 Now: $29.65 -3.48% Total return: -3.48%
Cash
New comments: We hold just under 50 per cent cash in our ValueTrend Equity Platform at this time, and have throughout the summer. Over the years we have found that the single most effective way to reduce risk and outperform the indexes is to follow a disciplined market timing process. Picking "good stocks" doesn't help in a broad based sell-off. The best way to reduce your risk and increase your returns is to hold cash when risk is higher, and then redeploy that cash into cheap stocks when market risk is lower. We've demonstrated this process by raising cash and limiting our clients' risk over 2 decades – and more recently in the 2008, 2011 and now the 2015 market corrections
Total Return Average: -0.91%
Market outlook:
Back in April, and throughout my summer appearances on BNN's MarketCall, I pounded the table strongly, advising viewers to consider selling higher beta stocks and hold a substantially greater than normal weighting in cash. My reasons behind this recommendation included: overly optimistic sentiment readings, historically low volatility readings, market breadth divergences (including a Dow Theory signal as transports began underperforming industrials) and the coincidence of several bearish cyclical influences. At ValueTrend, we followed our own advice and raised around 50 per cent cash in April – holding that level to the present. This strategy enabled us to sidestep the majority of the market drawdown – and just as importantly, has provided us with capital to buy stocks at substantial discounts from where we were selling. Our portfolio has experienced only a tiny negative fluctuation over the summer, putting us substantially ahead of the major markets of the world for the year.
The good news now is that those same indicators that flashed "SELL" in April are now flashing "BUY" – and have been for a few weeks. Bear in mind that these are leading indicators that can signal a month or two ahead of major moves – just as they signalled bearishly in the spring well before the selloff – but the bullish message they are delivering is quite clear. To view the specific indicators that I follow, I'd recommend reviewing a blog I posted at the end of August. We are now preparing to buy, and we have a long list of stocks that we expect to accumulate over the coming days and weeks. Despite the traditional seasonal buy period not starting until the end of October, history shows us that the end of September or early October can be an ideal buy point – especially after a stock market correction. Favoured sectors include home builders, specific technology stocks, U.S. banks, consumer discretionary, mid-caps and Canadian telecoms. For those who followed my guidance and held cash over the summer – I believe that now is the time to start picking away at the great opportunities that lie before us.