Investment Q&A

Q: The S&P is now 25% above the low of October. Based on the statistics from previous recoveries ( you had an interesting report on these, which I can't find) where are we (likely) now? Near top of recovery phase or with significant room to run?? Thanks Jim

Q: 10:31 AM 7/11/2023
We would appreciate Peter's opinion because we are concerned about the litany of advice we hear against large portfolio concentrations in individual stocks or sectors because we are repeatedly told this is bad.

But in your answer to Angelo's question on the 7 giant US technology companies on June 23rd 23 you said "some investors like concentration. In fact, done right, concentration is one of the better ways to increase wealth. But for a general investor, we would suggest a cap of about 30% here.

5i seem to be content with 15% in the Brookfields

June 22nd to James you said "We typically get nervous as our [individual] weightings approach 10% and caution against a 'one stock' portfolio".

In our own portfolios of Canadian stocks, as long term forever holders would not the same logic apply to hold a 30% or more weighting in the 5 big Canadian Banks through all the ups and downs of the markets, for steady dividend income with some growth?

One family member has comfortably held RY since 1968 and 10 shares bought 55 years ago have grown to 326 shares today through 4 stock splits and dividend reinvestment when available, and never regretted or worried about it.

The same logic must surely apply to holding other large sector positions: 15% in 3 Pipelines, 35% in 7 Utilities, and 2 Telecoms.

I know most Brokers and Advisors like to advocate "diversification" and "trimming" and switching to "hot" sectors but it seems to me that much of these strategies are designed, even with the best of intentions, to just encourage trading and switching to generate fees.

So Peter's best advice please - in the end how bad is it to just hold a concentrated Canadian Blue Chip portfolio in Financials, Pipelines, Utilities, and Telecoms with a small 15% scattering in some other sectors? This way we have few worries, no foreign currency risk, miss the thrilling scary ups and the frightening crashes [like Nortel and Concordia], but sleep at night.

Thank you............ Paul W. K.

Q: All three stocks have been setting higher highs and higher lows since mid April. Have you heard any news on why these three stocks are having a positive uptrend recently? All three have crossed the 50 and 200 day moving averages. Clayton

Q: Hi 5iResearch Team,

My question is general. Recently I came across an article on Bond-reform proposal by Federal Government. In which it was mentioned by a group of institutional investors that this means higher interest rates for companies, provincial governments and other bodies that issue bonds. If that is right then will not mortgage cost for the home owners will go up?

I will appreciate if you could give some info on this money lending cycle.
 
Thanks

Piyush

Q: What evidence is there that the rise in interest rates have been the reason why inflation has declined?

Q: In many questions asked there seems to be some expectation that interest rates will go down at some point in the relative near future. Do you think this is a valid expectation? Employment remains strong; housing market prices are holding; with some limited exceptions we have not seen significant layoffs…. Why would the Bank of Canada reduce rates anytime soon? I suggest that we had such low rates for so long, people expect that to be the new norm. We are only now
approaching the level of rates that were ‘normal’ for a very long time. What am I missing?

Q: your thoughts on Bitcoin? Not that they are right but it seems many huge asset managers are becoming interested again. For now, I believe Bitcoin is a store of value and is yet to make the tranition to unit of account. In terms of asset allocation, would it make sense to allocate a small percentage of one's portfolio 'in case it catches on'? Do you see an asymmetric upside vs limited downside and would that not justify a small position?

Q: I hold a significant percentage of my portfolio in XEC and am happy to have the exposure to add diversification. It has been a bit of a drag on returns for a while now however, and it has me wondering — what are some plausible scenarios moving forward where emerging will outperform? Have there been significant episodes in the past 100 years or so where emerging was at the top of the index return lists?

Q: Dear amazing 5i employee,

I trust that you are well!

An analyst at 5i noted (in answer to one of questions) that there are dozens of trading opportunities available in the market right now. Would you be able to list some of those opportunities? By trading opportunities I mean simple trades (buy low, sell high).



Yours kindly,
David

Q: Supposing that an investor had three registered accounts of roughly equal size that they wanted to change from equity ETF's to a fixed income allocation for their portfolio, and these accounts would have to be converted to RIF's in 6 years. Let's also assume that we get one or two more small rate hikes this year, then interest rates flatten and begin to come down slowly over the following several years. Which of three options would you choose on a risk/reward basis? 1. Just hold money market funds currently paying 4.5%+ 2. Barbell XSB and XLB using two accounts, and put XBB (or ZAG) in the third (avg. yield close to 3 %? with potential cap. gains) 3. Put TLT in all three, yield close to 3%? maybe highest potential cap. gain? With the BOC policy rate going up close to 5 points since the start of 2022 the bond funds above fell anywhere from 10%+ to 30%+. Does that imply that if the BOC rate went back down 2.5% that they would rise 5%+ to 15%+, or you can't make that kind of straight line assumption? Maybe there is a way better option, but I don't really want to tie up funds in GIC's and don't want to try to pick individual bonds either. I also considered something like PSA but no cap gain upside there and the money markets probably pay as much interest or more. Thanks for your thoughts.

Q: Would a concentrated portfolio of 10stocks made up of large cap companies regarded as compounders from 5 sectors provide adequate diversification for a RESP ? If not, could you suggest a minimal modification to add diversification?

Thank you

Q: Is US large cap tech too expensive to buy here, or does the AI theme make it have room to run up further?

Q: Here is a situation which is prevalent in many parts of my portfolio. for example, I have BNS at an average cost on ~$72. It closed yesterday at $64.50. If I go with 'timing the market' I should probably exit the stock. If I go with 'time in the market' I should continue to hold and collect the dividends.
Is there are 'rule' one can use and does that rule vary for large cap stocks like BNS or a small cap stock like PNE which I also own?

Q: Is the 'cardboard' metric a real thing? When cardboard sales dip, it is a precursor to an economic slowdown?

Q: Hi Peter, My question is about returns in the S&P during a four year Presidents term. On average what are the markets (ie S&P 500 ) return in year 1 vs year 2 vs year 3 vs year 4. I heard an analyst mention that the best returns come in year 3. Can you confirm the returns by year. I appreciate the great service.

Q: When lookking at the ROI over 3-5-10 years. The S&P has always done better than the others. When looking at the strength of their economy and the investment that US companies put in R&D how are they gonna loose their 1st position as a super economy power? and foremost and this is the question: Why invest elsewhere? Canada with merely 5% of the world economy? Europe has been lagging since I started investing 40 years ago where else? China? gotta be kidding. Seriously why spread our investments worldwide when the best is our neibours? Just buy the S&P and wait still forever.

Thanks

Yves

Q: hi, portfolio analytics says I am underweight basic materials, consumer defensive, healthcare and industrials. can you provide a few Canadian and US equities in each category, that you would consider for medium to long term investment.
cheers, chris ( take as many credits as you need ).
further, I am overweight in utilities ( 18.6% of total holdings ) and financials ( 25.5 %). do you recommend trimming these 2 sectors? and in financials I own BN and BAM ( which I would suspect actually have cross-over with other sectors? )??
cheers, chris

Q: US stock market almost recovered after a stunning run lately. The Canadian market is apparently still recovering. Do you think there is a rotation that will be going on, e.g. Canadian stock market, or non-AI stocks? I am wondering whether there are some Canadian stocks that may be benefit from the rotations that we can invest now?

Q: Dear 5i,
At a high level with respect to Canadian stocks.
Which sectors are the most sensitive to interest rate changes?
For the ones you identify can you please suggest how they might react
when rates go up or down?

Q: hi, any news accounting for the severe stock price decline today? further, what is your best guess as to where we are in the "recession" cycle now??