A Comment -- General Comments From an Expert (A Commentary)

Yes, that's the consensus. Q3 earnings turned positive YOY (it had been negative in prior quarters). In Q4, it's supposed to be up about 4%. TSX is actually negative YOY. 

But if you look into 2024, analysts for both the TSX and S&P expect EPS to increase in the 11-12% range YOY. That tells her that analysts are still calling for earnings growth, which typically doesn't happen when you're in a recession. So it's implying that soft landing scenario where economic growth slows, but we don't get into a prolonged period of negative growth.

Likes them as a group. Lagged general market for two consecutive years. Highly regulated, which protects them for a lot of potential downfall. Must maintain certain capital requirements, provisioning for a slower economy.

What are ETFs and Mutual Funds?

ETFs and Mutual Funds are both types of investment funds, meaning they pool money from many investors to purchase a diversified portfolio of stocks, bonds, or other assets.

Exchange-Traded Funds (ETFs)

ETFs are investment funds traded on stock exchanges, much like individual stocks. They aim to track the performance of a specific index, sector, commodity, or asset class. They offer the flexibility of buying and selling shares at any time during the trading day at market prices.

Mutual Funds

Mutual Funds, on the other hand, are investment vehicles managed by professional money managers. The fund’s net asset value (NAV) is calculated at the end of each trading day, and all buy and sell transactions.
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Wording has been very careful. At the meeting last week, we got the clearest sign yet that the last rate hike is in, and that the next move is down and almost certainly in 2024. Only issue left to debate is whether the cut comes earlier or later in the year than markets are expecting.

AI and big data. Autonomous vehicles. Infrastructure. Green energy. A number of themes have secular tailwinds, which are especially important when facing a macro environment with medium-term growth headwinds. More so in Canada than in the US, where he can envision the fabled "soft landing". 

Be on the lookout for companies that are innovative and "changing everything".

Early days for AI technology. Viewers might have seen the AI-generated commercial for the Toronto Blue Jays. All tech has hiccups and bumps on the way to mass adoption. Nevertheless, it will be disruptive and a game-changer for lots of industries.

Often these plans not only drip, but buy shares at a discount. Good opportunity, if you don't have an immediate need for the cash, as you typically wouldn't in a TFSA.

If you have a winner, don't trim, unless it's become an outsized portion of your portfolio. In that case, you have undue concentration risk. If your position is more than 10% of your portfolio, you should lighten that up. While you might like a company and its prospects of a long runway, things do change and you don't want to get caught wrong-footed.

You want to right-size your positions, typically 6-7% of an equity portfolio, and of course much less than a percentage of your entire portfolio and all the asset classes you might own.

If the US Fed cut rates in 2024, winners will include emerging market and value stocks. The USD will decline and EM stocks will climb; those countries hold big USD debts. Long term, reinvested dividends count, not stock prices. So, invest in business whose dividends will rise over time. In 2008, Canadian banks were yielding 8% as prices fell, but prices eventually rose.

Holding small amounts of cash, but largely moving into the market. Watching uptrend in markets right now. Looking for opportunities in "tax loss sellers" as we approach the end of the year. Negative divergence between industrial (going down) and transports (going up) stocks is hard to explain. Good time to be buying overall. 

Market reaction to "dovish" US Fed policy is shocking. Thinks US Fed should be preparing for weakening economy. Not much reason for optimism in markets. End of January will be interesting to watch, as "funding" announcement for US Fed(paying bonds/government salaries etc.). Thinks US Fed announcements were a mistake (should have communicated more economic pain to markets). Overall, everybody is guessing on direction of markets. 

As we approach the end of the year - is comparing previous forecasts to what actually happened. End result was that I (Larry Berman) was very wrong about market predictions. Given current market levels, doesn't think much opportunity left in markets. Would wait for market weakness before buying. Expecting pain from "main street" as mortgages renew with higher interest rates. Would not recommend chasing "Magnificent 7" as these companies are not representative of overall economy. Long story short - is expecting a recession. 

Telus vs. Bell Canada Enterprises: Investment Outlook

Telus is considered to have potential for a better rebound in a recovery but is associated with higher risk. We perceive BCE as a safer overall choice, providing stability in a potentially volatile market. Both companies are expected to exhibit similar movements over an extended investment horizon. BCE offers a lower valuation with a higher dividend yield and a better margin profile than T, and for those reasons, we feel it is the more conservative option between the two.

In summary, while Telus may present opportunities for higher returns, BCE is seen as a safer and more stable choice, particularly in the current economic climate. Investors should consider their risk tolerance and investment objectives when choosing between these telecommunications giants.
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Believes recent China stimulus program will keep markets higher globally. Markets very difficult to read at the moment with apparent strength on the back of rate hikes. Lots of investors playing catch up to index funds. Tax loss selling will create opportunities for buyers toward the end of the year. Companies that have been over punished the past few months, will present buying opportunities. If US Fed starts to cut rates, the US dollar will fall with rising commodities. US consumers appear to be insulated from higher mortgage rates with 30 year mortgage terms.. ~45% of Canadian mortgages will renew next year with higher rates (concerning for Canadian economy). 

Importance of Return on Capital:

The terrible business doubled its earnings in ten years but requires ten times more in PPE, that business is just better off not growing at all, as it massively dilutes the returns on Property, Plant and equipment (PPE), making it a less valuable business over time. 

On the other hand, good businesses earn decent returns on incremental capital, as a result, maintaining the quality of the overall business.

Lastly, a great business can “earn more with less”, making the overall business a more valuable business over the long term. This situation is usually referred to as operational leverage, as earnings grew at a faster pace than assets. In this situation, reinvestment makes sense, and earning is highly preferred to being retained within the business to grow rather than paying out to shareholders. Alternatively, this surplus capital can then be returned to shareholders through dividend increases and buybacks.

As a result, these names are usually the safest to own but hardest to find as the list of names is usually short and they rarely trade at a discount valuation. Therefore, investors usually reward these companies with a premium valuation compared to the general market or its peers’ group.
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