The third quarter isn’t done yet but we thought we’d get a head start on the fourth quarter. In this conversation John O’Connell, Chairman and CEO of Davis Rea Investment Counsel, and his colleague Zachary Curry, president at Davis Rea, analyze the prospects for stocks against the backdrop of the economy, earnings expectations, supply chain constraints, the Delta variant, and other factors. Here’s why investors need to broaden out their lenses to focus on the companies that will thrive the next three months and well into next year.
There’s been much debate about the impact of the Evergrande debt debacle unfolding in China. Will it lead to contagion in other markets or will it be contained and wind up being a one-off market event fed by some end of the world media headlines, and likely an excuse for some investors to take some profit? Thomas Lee, Head of Research at Fundstrat, has been relentlessly optimistic about stocks and relentlessly right for several years. Here are his four reasons why the major indices can continue to move higher and side step the Evergrande fallout.
Higher prices for goods and services started about 16 months ago. Consumers expect inflation to remain relatively high for the next few years. Prices for everything from groceries and natural gas to marine freight costs and uranium are surging. And the debate continues whether inflation will be transitory, as the Federal Reserve claims, or that higher prices will persist for a long time. So, we’ve turned to someone who’s studied inflation dynamics and economics in general for decades. J.J. Johnston, Executive Vice-President & Chief Strategist, Davis Rea Investment Counsel, draws on historical precedents, patterns and trends, and reams of data to make his determinations, and what they may mean for investors. Watch and listen to our conversation to learn the reasons why Johnston believes higher prices will not persist but how inflation could rear its head down the road.
Uncommon Sense Investor visitors continue to discover this article in our archive. So, like a deep cut song by your favourite singer, we’re dusting it off and reposting it to our front page: Unless you’re a trader, the advice to investors from portfolio managers worth their salt is to own well-managed, dependable, market-leading companies that people touch every day, and to own them for the long haul. So what do you want to own from now until at least 2025? We ask because RBC Capital Markets Global Equity Research team has put together an exhaustive report entitled Imagine 2025: Themes, Opportunities and the “Law of Accelerating Returns”. We’ve plucked some key commentary, a list of 70 stocks from seven sectors, 10 Top Picks, and a few illuminating charts.
It’s always worth revisiting the 10 Rules for Investing by Bob Farrell, the legendary former head of research at Merrill Lynch. It’s especially timely when the major stock indices and many other indicators are breaking many of his rules unlike the Merrill Lynch bull not breaking China in that commercial years ago. We hi-light Rule 5 and a telling chart which relates to retail investors or the general public or, as many call it, the dumb money. The more there is, the worse it gets. Here’s why.
It’s often fascinating to find out what makes people tick. How and why their personality was shaped. That’s the case with Keith McCullough, the tenacious, Canadian-raised, opinionated founder of Hedgeye Risk Management. Much of his desire to succeed and beat Wall Street at its own game stems from his childhood and what he witnessed and absorbed from certain family members. Watch McCullough explain, in a way he hasn’t before, why he needs to be antagonized and someone to play against, and how he “weaponizes” criticism to his advantage.
We haven’t checked in with the prolific Dr. Ed Yardeni for a while. But the timing is right because the President of Yardeni Research is making a bold call the S&P 500 will reach 5,000 by the end of next year, a gain of nearly 13 per cent from current levels. But maybe it’s not that bold a forecast, seeing that Yardeni has been bullish and correct about the direction of stocks for many years now. Here are some of the factors, as Dr. Ed sees them, that will propel the broad index to that round number over the next 17 months.
Big does not always equal profitable. Many of the world’s largest companies have no profits – we’re looking at you, Uber – or decelerating or surprisingly small earnings for companies of their size. Fortune, long a reliable supplier of lists about corporations, has sized up the most profitable companies in the world. Here’s the top five.
Shy. Reserved. Polite. Those are three cliches about Canadians. You can add to that list pessimistic, gloomy, and anhedonic (an inability to feel pleasure). That’s the Wikipedia description of Eeyore, the fictional character from the Winnie the Pooh books and that’s how Brian Belski describes Canadian investors. He doesn’t mean it literally or maliciously. But after more than 20 years visiting Canada from his native Minnesota, and meeting with various investors, the Chief Investment Strategist at BMO Capital Markets, definitely sees a difference in the mentality of Canadian investors versus those in the U.S.
Last December, we repurposed a blog by Jesse Felder of The Felder Report entitled The Courage to Act on Major Commodities Bull Market. At the time, Felder had been arguing for several months that commodities were climbing out of a 10-year consolidation and investors should be putting some money to work in the sector. A key commodity index has since doubled. Felder is back with a followup to his original piece with a blog entitled A Generational Opportunity in Commodities, Part Deux. Here’s his take on supply and demand dynamics and why commodities are on the verge of a clear breakout.
When you’re right, you’re right. And Brian Belski has been correct now for about 13 years. It was 2009 when the Chief Investment Strategist at BMO Capital Markets and his team started calling for an extended bull market for equities. The following year, Belski went further out on the limb saying conditions were in place for a 20-25 year bull market, which could run to at least 2030. There, of course, have been corrections and crashes along the way such as 2020’s record-setting steep decline, something Belski called a reset. He also called the market bottom nearly to the day. Belski has maintained this unalloyed bullishness despite some other strategists and academics repeatedly predicting a gloomy end for stocks. In this conversation, Belski details the factors that continue to give him faith the bull market will continue to run.
John O’Connell is not afraid to go very heavy on large capitalization, multinational U.S. stock names. The Chairman & CEO of Davis Rea Investment Counsel simply believes it’s the place to be. O’Connell is featured in a Special to The Globe & Mail article. Here are some of the hi-lights.
There really isn’t a lot to say about what’s going on in the stock market that you likely haven’t recently heard. Not much has changed, with investors at somewhat of a standoff. Given the positive tilt to attitudes as expressed by mostly fulsome valuations, the betting is mostly of the bullish view. So, we won’t waste space here. We naturally all prefer this positive vibe, but it does little to provide any assurance of how we will collectively feel one or two years out. Read more…
Keith McCullough doesn’t care what you think of him. He gets that attitude in large part from his father, a firefighter, and one of his grandfathers, who was one of 19 children from Quebec, and became a successful, serial entrepreneur despite a limited education and often being told he wouldn’t succeed. McCullough loves to hear he’s not good enough. He heard it growing up in Thunder Bay playing hockey, which culminated in him captaining the Yale hockey team to a championship. And McCullough still hears it as the founder and CEO of Hedgeye Risk Management, a firm he launched in 2008 as a disruptive competitor to the “Old Wall” Street ways of doing business. It’s why the guy they call the “Mucker” is driven…Click the link or image above to keep reading and watch the video…
Investors are pouring more and more money into exchange-traded funds. More than $6 trillion globally as of 2019, more than double the inflows for the hedge fund industry. These investors are choosing to access the indices, stocks, sectors, and alternative strategies ETFs offer. And they like the ease of use and generally low fees. But if you’re looking to add some ETFs to your portfolio or thinking of buying some for the first time, there are a few key principles you should consider before pulling the trigger. Greg Taylor is back with some ETF talk. The CIO of Purpose Investments knows exactly what to look for and what to shun when investing in exchange traded funds.
If you wanted to take investment advice after the financial crash in 2008 and beyond, you could have done a lot worse than listening to Brian Belski. The Chief Investment Strategist of BMO Capital Markets, and his team, started calling for a 20-25-year bull market in 2009. And during the 2010s while many macro strategists and academics were pointing out everything that could trip up the market, stocks generally chugged higher. And after the pandemic-led crash last year, Belski called the bottom nearly to the day. He said the market had reset and the bull market still had at least another 10 years to run. We’ll post a fascinating interview with Belski next week. For now, here are three innovative, leading companies that can thrive for at least the next decade.
No quibbles in this corner about the long-term stock performance of Netflix. The stock is up about 465% per cent in the last five years. But is the big spending, online video streaming leader a buy now after a tepid earnings report. And with increasing competition from the likes of fast-growing Disney+, are the days of heady growth for Netflix over? Hedgeye analyst Andrew Freedman explains why, for now at least, Netflix shares are in purgatory and likely to fall.
What’s the difference between successful investors and those who flail around year after year? In a general sense, it comes down to a plan. Successful investors have systems, rules and discipline. When they buy a stock they know why. They know what they’re going to do if it does well, and what they’ll do if the investment goes sour. If that investor also has more than 30 years experience in the investment business, and has developed very specific methods around fundamental and technical analysis, and other at the ready investment principles, the probability is their returns and ability to protect capital will be solid.
Getting spooked by the recent changes and volatility in the stock market? Let’s back away from the screen, take a deep breath, and turn to the Global Equity Strategy team at J.P. Morgan, for some perspective. After all, as we’ve noted before, they’ve been very accurate in reading the economy and market expectations since the pandemic began. Here’s why concerns about peak growth and peak earnings are overdone and why these research pros are upping their year-end target for the S&P 500.
Exchange Traded Funds? Uncommon Sense Investor never talks about ETFs. You’re right. We generally prefer to present videos, research and articles about stock picking. But we also can’t ignore this sector that has grown about 10-fold the last decade, and by 35 per cent year-over-year in Canada in the first six months of 2021. Greg Taylor knows his way around ETFs as the Chief Investment Officer of Purpose Investments. In this conversation, he presents some thoughtful advice on how to construct a winning ETF portfolio using growth, income and alternative and hedge fund-style ETFs. He also explains what to look for when doing research and what to avoid.
Doug Kass isn’t ordering a Code Red like Jack Nicholson’s character in A Few Good Men but he’s called one on the stock market. The Founder & President of Seabreeze Partners Management is widely followed for his market commentary. He knows from experience that bull markets are hard to kill and acknowledges stocks can go higher still so he’s not aggressively shorting the market. But in these excerpts from a recent piece Kass details a litany of warning signs, as he sees them, that will eventually lead to an ugly end.
Investors often get bogged down in following too many data points in trying to assess the future direction of stocks. While looking at global macro factors right down to the minutest of details about a company’s products or services are important, one simple way to determine whether a stock is going to go up or down is to track the direction of a company’s earnings. That’s because share prices track the direction of earnings 93 per cent of the time, in the case of the S&P 500, anyway. Here’s some brief commentary from Canaccord Genuity’s Chief Market Strategist, Tony Dwyer, on the “summer of indigestion”, “peak everything”, and what’s important to remember.
We’re of the opinion that, barring an exogenous shock of some sort or Black Swan event, stocks should continue to do well. Yes, there’ll be pullbacks and corrections along the way, but as the following opinion piece details, there are just too many unusually bullish factors in play for stocks to fall off a cliff, as some have been predicting for months. Here are six reasons why equities are the place to be long-term, three investment themes, and three stock ideas.
We’re trying to not get dragged into too many stories comparing the current stock market environment to the tech boom of the late 1990s and 2000, but they keep pullin’ us back in. This time it’s because technology stocks and bond yields, which usually, happily, chug along mostly in unison, are now seeing the largest divergence in years. Why? And what does that mean? Here’s commentary from Lisa Shalet, Chief Investment Officer of Morgan Stanley Wealth Management .