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Inside the Market Top stock picks from the biggest hedge funds and mutual funds

A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

Citi U.S. equity strategist Tobias Levkovich compiled the holdings of the largest 50 actively managed mutual funds and hedge funds and found a lot of commonality in terms of holdings,

“A review of the equal-weighted performance of positions in each sector displayed that the top-50 holdings at mutual funds and hedge funds outperformed the S&P 500 index … For 50 actively-managed mutual funds, Health Care names represented 17.3% of the most common top-10 holdings in 1Q19 compared with 4Q18’s 21.1%. IT names comprised 18.0% of the top-10 positions of 50 mutual funds in 1Q19, versus 15.5% in 4Q. Similarly, hedge funds’ weightings showed a meaningful preference for Information Technology (18.0% of the largest 50 top-10 equity positions in 1Q vs 18.1% in 4Q) and Health Care (17.3% of the top-10 equity positions in 1Q vs 15.7% in 4Q)”

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The usefulness of these top holdings list is a long discussion. Short hand, the stocks listed in the tables below have strong price momentum which makes the short term outlook brighter, but longer term crowded trades tend to underperform.

The top of both lists contains the usual suspects – Amazon.com, Alphabet, Facebook and Microsoft.

“@SBarlow_ROB C: Most widely held stocks by HFs” – (full table) Twitter

“@SBarlow_ROB C: Most widely held stocks by MFs” – (full table) Twitter

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BNN Bloomberg’s headline, “Vancouver’s dirty money figures: The smoking gun that wasn’t” is fair, but a bit misleading.

It implies a “nothing to see here" conclusion on B.C. money laundering and real estate investment, but the text says, “we know so little that no number is very reliable.”

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“Vancouver’s dirty money figures: The smoking gun that wasn’t” – BNN Bloomberg

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In terms of the U.S. China trade spat, there are mixed signals coming out of the Middle Kingdom.

On one hand, state driven media argued that there’s no real utility to future talks (this caused a drop in equity futures) but there are other reports suggesting China wants to solve the issue through negotiation,

“U.S. ‘not sincere’ about wanting more trade talks with China: media” – Reuters

“ Premarket: World markets struggle as Beijing ramps up war of words” – Report on Business

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“China says always wants to resolve disputes through talks” – Reuters

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Most of the discussion surrounding Canadian debt levels has revolved around households, but the Bank of Canada warned that investors should keep a close eye on corporate debt levels.

This isn’t easy – unlike the U.S., valuable information like corporate credit spreads is not readily available in Canada,

“Debt to income levels among Canadian non-financial corporations are “well above” historical levels and are one of the top vulnerabilities to the country’s financial system, the central bank said Thursday. As of the end of 2018, non-financial corporate debt was 315 per cent of income, the Bank of Canada said in its annual Financial System Review. In addition, the share of outstanding debt owed by firms that have poor debt-service capacity and low liquid asset holdings is also higher than is typically the case. The central bank singled out companies in the commodities industry, which it says are carrying higher debt loads while suffering from falling income due to declines in global resource prices.”

“Fragile corporate debt emerges as Bank of Canada vulnerability” – BNN Bloomberg

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A brief video from Bloomberg highlights six economic signals – treasury yields, Caterpillar and Apple stock prices, copper, the Australian dollar and the Korean won – are indicating a sharp slowdown in the global economy,

“ These market signals show the outlook for the global economy is grim” – Bloomberg

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Tweet of the Day:

Diversion: “Cars will change more in the next decade than they have in the past century” – The Conversation

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