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Canadian Blue-chip Industrial Forum

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Msg  66665 of 66829  at  1/20/2020 7:33:51 PM  by

carswell


Market Call

MARKET CALL NEWSLETTER
January 20, 2020


Jason Del Vicario's Top Picks: Constellation Software, Parex, Texas Pacific Land

BNN Bloomberg

MARKET OUTLOOK

We’ve been concerned about heightened recession risk for over a year now, taking the opportunity to slowly shift our portfolio to what I refer to as a “barbell” approach.

On one side, we have equities that we find using our proprietary quantitative screening technique. These companies generally possess the following attributes: little to no debt, high and consistent margins and asset turn, they’re buying back shares and run by capable management teams. We have also started to pay attention to how we expect companies to do in a recession by looking at how they did during the financial crisis. We believe companies like Ross Stores and Dollarama can in fact improve their results during periods when the consumer is struggling.

On the other side, we have securities we feel can zig if when the markets zag. U.S. Treasuries, Canadian government bonds, gold and silver are such examples. We don’t know if or when the consumer will roll over and tip us into a recession, but the longer this “expansion” continues, the sharper the inevitable correction will be.

We caution against reaching for yield at this stage of the cycle. Our sneaking suspicion is that corporate debt is where we’ll see signs of cracks leading to the next downturn. Pay particular attention to high yield spreads for clues.

In short, we continue to play offence while being very mindful of the downside risks. Interestingly, in spite of being quite conservatively positioned through 2019, we were able to match our benchmark due to the alpha generated from strong security selection. We believe our clients will benefit from our continued cautious stance.




 
 
 

John O'Connell's Top Picks: Amazon, UnitedHealth and Visa

BNN Bloomberg

MARKET OUTLOOK

The market is quickly approaching most people's year-end targets. It had a very strong fourth quarter to finish of 2019 and we've continued that pace into the new year. I think a lot of people are calling into question the ability for the market to keep doing this and, of course, it's unlikely you'll see it going up every single day ... But the combination of decent economic activity, a moderation in the trade rhetoric, and the fact interest rates are going to remain low for a long period of time has given markets a lot of comfort. There not being a lot of alternatives out there means stocks have been getting their fair share of attention these days.




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