Independent Insight
Why Dangerous Assumptions Are Embedded in “Cheap” Stocks
Based on valuation, this stock is “cheap.” We are sure you have heard that more than once from a portfolio manager, analyst or other type of market player. But what if their assumptions for economic growth and earnings are incorrect from the start? Then that valuation considered “cheap” is immaterial and the stock becomes a trap. There is a distinct possibility many stocks that appear to have reasonable price-to-earnings valuations right now are a risky bet based on overly optimistic profit margin estimates. That’s according to this former hedge fund manager and founder of an investment research firm.
Explaining the Inverted Yield Curve & Why It Matters
So, the yield curve is inverted. What does that mean? Well, going back to the 1950s, it has a perfect track record of predicting recessions (except for one time in the 1960s), technically two consecutive quarters of negative growth. The yield on the U.S. Two-Year Treasury Note (some use the U.S. Three-Month Treasury Bill) has been above the yield on the U.S. 10-year Treasury Note for about nine months. The short end of the curve, the two-year, is tracking short-term interest rates, and the longer-end, the 10-year, is generally reflecting expectations for economic growth. The mainstream media caught up to the story this week because the yield curve inverted the most since the recession of 1981 (10-year below the two-year by 110 basis points, as of this writing). Keep reading for more on the inverted yield curve and why it matters to your portfolio…
Five Reasons These Three Companies Will Benefit from ChatGPT
It is not surprising the CEO of OpenAI is enthusiastic about his company’s language processing tool, or artificial intelligence chatbot, ChatGPT. But some of Sam Altman’s comments in a highly anticipated fireside chat smacked of hyperbole. He asserted that AI is ‘the next platform’ for explosive innovation, economic empowerment, and value creation. Altman also claims the AI tech revolution will be bigger than the Industrial revolution or any prior tech revolutions, with potential to create ‘unimaginable economic growth and prosperity’. He may eventually be right but we reserve the right to be at least a little skeptical of that type of proselytizing. Having said that, here are five points that Altman hit on that stood out for analysts from Morgan Stanley Research.
Best Stock Ideas for 2023 From Our All-Star Roster
Time once again for a list of compelling stock ideas for the new year courtesy of our all-star roster of eight money managers, analysts and investment newsletter writers. From real estate expert Dennis Mitchell doubling down on a large cap stock to Davis Rea Investment Analyst Matthew Aspro’s favourite U.S. bank to market-beating contrarian Benj Gallander, who won last year’s stock picking challenge with a gain of 40 per cent. Large caps to small, dividend payers to growth companies and turnaround stories, we’ve assembled an eclectic array of top stock picks for you to consider to freshen up your portfolio.
Latest Stories
No Trough Yet But Emerging Markets & Japan Leading the Way Up
Many investors are anxious for the major North American stock indices to do what they want them to do instead of what they’re actually doing. That is not finding a bottom yet and continuing to drift lower as a recession in earnings is just getting started. Globally, however, emerging markets (EEM:US) and Japan (EWJ:US) appear to be further ahead in the cycle as those kinds of stocks are leading the way higher. See the hi-lights of this 2023 strategy report for which regions and countries will have the strongest returns next year and for recommendations on the types of stocks in which to invest.
Investment Outlook 2023
It’s the time of year for endless outlooks on the economy and financial markets for the new year. One has to be selective. To that end, we’re featuring the hi-lights of a 2023 outlook from a major investment house that employs and pays a lot of big brains to think deeply of what may transpire the next 12 months and what it may mean for investors.
19 High-Quality Stocks
The strategy team at Scotiabank is recommending investors upgrade their portfolios to high quality, defensive Canadian names given “monetary policy, earnings trajectory, and valuations.” Scotia also believes that stocks have not found their trough in the current cycle. The strategists have assembled 19 Canadian stocks to consider. We also feature bullish but tempered views from BMO’s Chief Investment Strategist, and a more bearish opinion on stocks from the strategy team at Bank of America. Plus, from the archive, Five Stocks for 2023, and 10 Stocks to Own Through 2025.
Ponzi to Bre-X, Madoff to FTX. Why Frauds Will Always Happen & How Investors Can Protect Themselves.
You may or may not have been caught up in the FTX cryptocurrency implosion but what’s certain is that financial frauds are as old as time and they’ll never be stamped out. Every go-go era, once the tide goes out, has its share of frauds, each one similar but different to ones that have gone before. The perpetrators even have the same smirks. See Charles Ponzi and Sam Bankman-Fried, as an example. Why do scams keep happening and how can investors make sure they don’t get duped by one? Watch this conversation with John O’Connell, a guy who’s seen it all in his 35+ years managing investors money.
Reset and Reload: The Case for Amazon
Never mind. That double in Amazon’s stock from its pandemic low to its peak in the summer of last year is mostly gone now. The e-commerce and web services giant is no longer a trillion dollar company. But that’s a good thing. As Amazon restructures, reassesses and repositions, it may be time for investors to consider reloading on the stock. Like many of its products over the holidays, the shares are on sale, down about 50 per cent from their highs. Amazon is unlikely to grow like it used to but many fund managers and analysts believe that five years out, this taming of a juggernaut is merely a temporary setback. Get John O’Connell’s views on the future of Amazon, and read some analysts’ commentary.
“Big, Real, Institutional Investor Class Money is Coming Into the Stock Market.”
John O’Connell on current stock market activity, where to find value, and all that cash on the sidelines being put to work.
Analyst: These Five Stocks Have 10-Bagger Potential
We try very hard to not have our headlines smack of hypberole. This one, we acknowledge, walks a fine line. In this case, we’re essentially the messenger as we came across an article in the venerable Barron’s, which cites research into companies that grow their stock prices by ten times or more over about a five year time frame. Nearly 50 per cent of the 175 stocks that have achieved that feat since 1980 have been in the technology sector. An investment research company has isolated five tech companies that its analysts believe have a chance at being ten-baggers over the next five years. No guarantees, of course.
Glass Half Full As Consumers Keep Spending & GDP Remains Strong
A widely followed U.S. Federal Reserve survey gauging economic activity was released this past week. The news would have you worry about impending doom. The facts are that the model estimate for real GDP growth during Q4 is 4.4% today, up from 4.0% on November 9. After this week’s retail sales report showed a solid 1.3% October gain, the nowcast of Q4 real personal consumption expenditures growth increased from 4.2% to 4.8%…Keep reading.
Five Copper Stocks for the Green Power Shift
There’s going to be a deficit of copper by 2030 of about eight million tonnes, according to a recent study. One CEO told me recently there’s currently only about five days of copper supply on the global market. This is as the world inexorably transitions to renewable energy and electric vehicles. Copper is one of the most-needed critical metals amid this shift as it conducts heat and electricity very well and has so many applications for use in electrical equipment, wiring, roofing and plumbing, industrial machinery, and electric vehicles. Which copper producing companies will be the winners for the rest of the decade? Here’s a list of five to consider and the catalysts that may drive their stocks, which are higher the last five years by between 52 per cent and 220 per cent.
Five Best Dow Dividend Stocks to Buy Now
How about that monstrous rally for the Dow Industrials last Thursday amid strong moves among all of the major North American stock indices? Was that a classic bear market rally triggered by many investors covering their short positions and others giving in – yet again – to a fear of missing out? Maybe. But the big gains hi-lighted some of the stocks within the Dow 30, especially the dividend payers. I sat in on a David Rosenberg speech this past week at a conference. The President and Founder of Rosenberg Research was unsurprisingly bearish and expects a recession next year. But interestingly, under that scenario, Rosenberg pointed to four areas where investors could protect and possibly grow their portfolio. They were, in no particular order, government bonds, gold, cash, and – dividend aristocrats, the kind of strong, leading companies that consistently pay and grow their dividend payouts. The Dow contains many of those types of firms. Below, we take a look at the five top-rated dividend stocks in the Dow.
Growth Portfolios Not Just for Younger Investors. Here’s Why.
At first glance, a growth portfolio is suited for a younger investor who has the benefit of a long time horizon to handle the added risk. Not so fast. Growth stocks for older investors can be perfectly fine. Find out why as we wrap up our Video Investment Series.
Growth or Balanced Growth. Which is Right for You?
During our Video Investment Series we’ve covered why you’re investing, asked you how much risk and volatility you can tolerate, which buckets to invest in, and many other rudimentary but crucial investing principles. John O’Connell has guided you through the difference between investing and speculating, how to protect your capital in inflationary times, and how much income and capital appreciation you need. Now, as we wrap up our series, the Chairman, CEO & CIO of Davis Rea Investment Counsel explains the differences between balanced growth and growth portfolios. Which strategy is right for you?
How to Preserve Your Capital in Inflationary Times
Preserving your capital should be your first goal. But how you preserve your money is not always easy, especially now with prices more inflated than they’ve been in decades. Learn how to protect and grow your capital in the latest instalment of our video investing series.
Davis Rea Conference Call
If you missed the live show, here’s your chance to watch the highly informative Davis Rea Investment Counsel conference call. Insight on the economy, inflation, interest rates, demographics, stocks, bonds, investor behaviour, plus some very illustrative charts. It’s all there. Get the details from the investment firm’s CEO, Economic Advisor, and Associate Portfolio Manager, about the strategies deployed that allowed Davis Rea equity and fixed income funds to outperform during the quarter.
“Roaring ’20s” Still Possible After “Mother of All Melt-ups” & Meltdown
Ed Yardeni has drawn fascinating comparisons between the technological innovation during the 1920s and the cutting edge technology trends of this decade. Find out from the President of Yardeni Research why another “roaring ’20s” decade is still possible for stocks despite the epic “everything” bubble that burst late last year and the subsequent decline we’ve seen since. Also, hear about Yardeni’s new service for retail investors called QuickTakes.
“Tremendous Opportunities” for Investors Despite “Rolling Recession”
Part two of our interview with Ed Yardeni sees the President of Yardeni Research explain how the U.S. is in a rolling recession, the possibility of a hard landing, the prospects for earnings, and when the major stock indices may hit a new high.
“It’s Right to Get Invested Here.”
John O’Connell on extreme bearishness, compelling stock valuations, and the potential for excellent future returns. The Chairman, CEO & CIO of Davis Rea Investment counsel believes the stock market is setting up long-term investors for some attractive gains. But that the S&P 500 may need to go down another 10 per cent or so before the worst is over.
“Lots of Things Are Breaking” Globally
Dr. Ed Yardeni considers himself an “optimist at heart.” But that doesn’t mean the President of Yardeni Research is wishing the U.S. Federal Reserve will “pivot” away from its interest rate tightening cycle. And it doesn’t mean Yardeni is hoping for the major stock indices to bottom. Instead, he’s tracking the data. Yes, he believes there are some “tremendous opportunities” for long-term investors and that a “roaring ’20s” decade is still possible after the “Mother of All Melt-ups. But he’s also pragmatic enough to see what he calls a “rolling recession” in the U.S. and has an opinion on the possibility of an economic hard landing. In part one of our interview with Yardeni, who has a wide following among institutional and retail investors, he gives us insight into why “lots of things are breaking” globally, why Fed Chairman Jay Powell is determined to slay inflation, where financial instability could emerge, the two “huge mistakes” the Fed made (Yardeni has written two books on the central bank), and many other cogent comments.
How Much Income & Capital Appreciation Do You Need?
How much interest income, dividend income, and capital appreciation does your portfolio require? It depends on a number of factors. John O’Connell guides investors through that decision-making process in the latest instalment of our Investor Education Series.
Four Ways to Determine Your Risk Tolerance
How are you coping with the wild swings in the stock market? How much stomach do you have for volatility and risk? In part five of our Investor Education Series, here are four ways to determine your risk tolerance.