When COVID-19 triggered a stock market panic in March, David Zanoni watched in disbelief as his life savings lost a third of their value – in what seemed like the blink of an eye.
It would have been a huge relief to just click on the sell button and end the emotional turmoil.
But three decades in the stock market told the seasoned investor otherwise. “I had been through the SARS epidemic in 2002 and swine flu in 2009,” Mr. Zanoni said. “They eventually wound down and the market went on to new highs.”
He not only stayed the course, but purchased units in the Invesco QQQ Trust exchange-traded fund (QQQ), which tracks the technology-laden Nasdaq-100 Index. It is up 50 per cent since March.
A stock picker in the top 1 per cent
The disciplined response to stock market fluctuations has worked out well for Mr. Zanoni, an operations supervisor at a multinational retailer and a financial blogger on SeekingAlpha.com.
For five years, his performance has been in the top 1 per cent of TipRanks.com’s ratings of stock pickers. Currently, he is 116th out of 14,546 financial bloggers, Wall Street analysts, corporate insiders and hedge-fund managers.
How he selects stocks
In a low-inflation world of highly stimulative macroeconomic policies, he prefers investing in growth stocks. “I look for companies with above-average growth in earnings and revenue,” Mr. Zanoni said in a phone interview. “My top three stocks are Apple, Visa and Facebook.”
In short, he seeks to hold shares in leading companies that are capitalizing on long-term trends arising mainly from new technologies such as mobile communications (Apple Inc.), e-commerce transactions (Visa Inc.), online social networks (Facebook Inc.), 5G networks and cloud computing.
Mr. Zanoni delves into the details of individual growth companies in his blog. A recurring theme is buying growth at a reasonable price: “I like to see a PEG [price-earnings-to-growth] ratio below 2 for high growth companies,” he said. Other valuation metrics are used.
After noticing the ARK Next Generation Internet ETF (ARKW) tracked many of the innovative companies on his watchlist, he bought units. The ETF has lightened his research load and more than doubled in value over the past two years.
All in all, not much has changed in Mr. Zanoni’s investment approach and portfolio since he was interviewed by The Globe and Mail in 2018. And despite the stock market collapse in March, his performance remains as good as ever.
Recent stock picks
In mid-September, Mr. Zanoni expressed a bullish view on KLA Corp., which helps semi-conductor manufacturers produce quality microchips for high-growth niches such as artificial intelligence, 5G and remote learning/working. Cash flow is at 22 per cent of revenue and the order backlog is at record levels. He likes the stock, but said he’ll wait for a better valuation before buying.
Earlier this month he was bullish on Analog Devices Inc., but, again, he is waiting for a lower valuation. The company supplies high-performance analog integrated circuits and recently obtained a more complete range of product offerings with the acquisition of rival Maxim Integrated Products Inc. Cash flow is at 33 per cent of revenue.
Apple remains a long-term favourite, but a big run-up in its stock this year led Mr. Zanoni in August to take profits on some shares. Technical indicators, notably the relative strength index, or RSI, were flashing overbought conditions, while Apple’s trailing and forward price-to-earnings ratios were very elevated compared with their historical medians.
Growth stocks can be dividend stocks
Owing to their strong cash flows, Apple, Analog Devices and KLA pay dividends that have been regularly increased over the years. Growth and dividend stocks are not necessarily mutually exclusive categories.
Retirement portfolio
In addition to his growth-stock portfolio, Mr. Zanoni continues to build wealth in a retirement portfolio, where he invests in low-cost, diversified funds through dollar-cost averaging. That’s where deductions are regularly taken off his paycheque and put into the funds. “I stuck with my dollar-cost averaging strategy in 2020 and ended up buying more shares at low prices when the market went down,” he said. “It was all automatic and done without hardly noticing or any stress.”
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