A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Canadian vs. US banks 5-10 years ago, he owned both kinds of banks after the recession because they fell to such low levels. Great investments then. Long-term worries now are that interest rates will stay low, which will limit banks profits. The valuation compression on banks will be long term. He still owns TD an RY, and in the States, Berkshire Hathaway and EVR. When the economy recovers, so will the investment banking business. Banks are still good to own for long-term investors to collect the dividends. For now, be cautious with the banks. He's underweight.
COMMENT
After the tech run-up this summer, we were due for a pullback as we enter the fall. There's still uncertainty over restarting the economy and whether cases will increase this fall, plus the US election. It's natural to pullback now. He's still positive long term and expects a good buying opportunity this and next month. He's getting ready to deploy capital in the coming weeks after raising cash. He isn't buying today, but waiting. Another 10% lower he will buy. The rise since March has been so big. There's a lot of cash on the sidelines waiting to get in. The oil sell-off: there was a natural bounce-back in oil driven by the reopening of the economy. The move down now reflects economically uncertain times. Oil remains a bellwether of the overall economy.
COMMENT
Tech bubble. There are different pockets of instability in the markets. Fundamentals have not changed but there is more expectation in the market now pushing the price higher. The companies today like Google or Amazon have good cashflow and are redeploying capital to grow. It is more by stock than the broader market.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The markets sold-off but there has been no real negative news. Markets have had a good run, with technology making big gains. It is probably a matter of investors taking profits that elicited more profit taking. Analysts believe it is normal, particularly looking at the straight up rally markets have had. Unlock Premium - Try 5i Free
COMMENT
Educational Segment. When comparing the highest rated companies (AAA and AA) to the lowest, they have all recovered to an extent. However, the B ranked companies, junk rated, recovered because of the implied government support. These have a 10-15% bankruptcy rate. High quality companies have consistently outperformed.
COMMENT
What's the catalyst for the selloff today? This market is so extended to the upside, you can't point to anything in particular. Sometimes these markets sag under their own weight. He's been getting more defensive. It's a tough market, as there are tailwinds, but it's so extended. Sees some risk in the growth stocks.
COMMENT
Are people losing faith in the work-from-home revolution? Reminds him of the crash of 20 years ago, when a lot of the tech stocks didn't achieve their highs again for another 15 years. The stocks were so ahead of their valuation. Zoom, Tesla, and Shopify are in the same situation. You're paying a lot today for future growth.
COMMENT
Could the selloff be just seasonal jitters? Valuation will matter. You can have a great growth period, but how much are you paying ahead for it? Interest rates are the biggest risk, with debt where it is and the amount of expansion. Any increase in interest rates will knock down multiples pretty substantially, and the growth stocks will suffer the quickest and the hardest. You'll be facing Wile E. Coyote-type air underneath.
COMMENT
Reaction to Altice USA offer to buy Cogeco? Offer seems relatively fair. Shares are relatively undervalued in the market, so the premium was offered as enticement. A long way from being a done deal. Telecom returns haven't been that robust over the last little while, so it represented a good chance to take some profits.
COMMENT
ETF management expenses. The ETF industry has changed. They used to track just the S&P 500, the TSX 60, etc., and the MER was very low. Now, there are more actively managed ETFs, and the MERs will be more expensive. Best place to find the actual MER is in the prospectus of the investment, found on the website or wherever you're buying it from.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The stock market has seen a surprising rally, welcoming stronger than expected Q2 earnings. However, a correction of around 10% is possible. Investors should still be comfortable investing now for a medium term timeframe of 3-5 years. Low interest rates and good earnings growth expectations for 2021 has investors willing to pay more for stocks. Unlock Premium - Try 5i Free
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