Hap Sneddon is chief portfolio manager and founder, CastleMoore Inc. His focus is technical analysis, tactical asset allocation and trading.
iShares Dow Jones U.S. Telecom Sector Fund ETF (IYZ)
Last purchased on August 13 at $29.39
Telecom is about to enter a period of seasonal strength. The investment into this sector appears to be coming earlier than early September, its typical start date, as evidenced by the strong relative performance against a weak stock market. We also hold AT&T individually for the many positive company-specific catalysts present. Upside target for the ETF is $35.50 (U.S.)
Last purchased on August 13, 2015 at $11.56
The company's positive Q2 2015 sets up a nice trend for the remainder of the year with a strong order backlog, improvement in its infrastructure division and the sale of Quito Airport. The stock recently tested the mid-$10.00 range and bounced. Upside one year total return of 46 per cent.
Last purchased on June 8, 2015 at $39.92
Emera recently reported earnings that blew away consensus, coming in at $1.08, in part due to its New England operation's greater utilization, hedges and the U.S. dollar. The sector just broke out on a real and relative basis, has strong seasonality through to late fall and a total return target in the 50-per-cent range.
Past Picks: August 27, 2014
Pembina Pipeline (PPL.TO)
We sold Pembina October 22, 2015 after purchasing it August 17, 2015, in what is a brief holding period for CastleMoore due to the continuing breakdown in the energy sector, eventually impacting the infrastructure and pipeline equities.
Then: $49.61 Now: $34.73 -29.99% Total return: -26.92%
iShares S&P/TSX Global Gold Index ETF (XGD.TO)
We continue to own a small portfolio holding and are looking to add to it at present.
Then: $12.30 Now: $8.74 -28.94% Total return: -28.53%
Fortis was sold in two tranches; one in December 2014 and the second in the spring for a total return of 29.61 per cent. This was a result of defensive sector weakness and a reduction in overall utilities allocation on a portfolio level. We began to reacquire Fortis (and Emera) in early July and continue to do so today.
Then: $33.31 Now: $36.31 +9.01% Total return: +12.93%
Total Return Average: -14.17%
Seasonally, we are entering one of the weakest times of the year for the broad indexes. Historically, the first rate increase of a new trend in rising rates produces an average correction of 10 per cent in the six month lead-up to the actual date of the increase. These, when added to the modest global and mildly growing U.S. economic data weakness, will make the next two months quite volatile and corrective. The nature of the correction – how much will it occur through time and how much will occur through price? – will be determined by a combination of technical support levels and economic data.
Conservative investors focused on growth and absolute return will find current opportunities in utilities, infrastructure, telecom, gold, agriculture, consumer staples and bonds.