Looking into 2016 Stock Opportunities

January 11, 2016

 

The numbers below speak for themselves L.  For those 100% invested in equity results will be similar to the indices below.  With 80% of the worlds bonds paying less than 1% per year portfolio’s will not be propped up by returns from fixed income.

 

 

LAST WEEK

TSX (Canada):   -4.34%

SP500 (United States):   -5.96

Nasdaq:   -7.26

Oil:   -11.9%

*globe and mail

 

For those with a diversified portfolio you are still probably negative for the week but much less depending on your allocation to equity and your exposure to the CDN$ which continued to weaken against the US$ last week.

 

For example our largest holding for clients (CI SIGNATURE GLOBAL INCOME GROWTH) was only down .22%...almost flat for the week!

 

Message for INCOME oriented portfolio’s…

I will finish off this portion of the communication with ‘the same old, same old’.

Money that is needed over the next 3-4 years needs to be allocated to lower volatility (and that means lower returns) assets.  Or as I often refer to them in meetings…’things that do not go bump in the night’.

 

The balance of the assets can do the work (which means more volatility) so that the total return of the portfolio can be 2X more than a 5 year GIC (currently 2.2%).

 

 

OPPORTUNISTIC    (not for everyone)

 

(I do understand that the charts and language may be confusing or gibberish to some BUT I include them so show ‘my home-work’ and as a reference point)

 

I have both an equity and a fixed income suggestion this week.

 

WHITECAP RESOURCES (BUY)

 

THE EQUITY CHART OF THE WEEK IS WHITECAP RESOURCES (click on for information) a Canadian Energy company.

 

The stock is once again reaching OVERSOLD (positive) levels BUT has broken through (to the downside) the August/September price level.

 This longer term chart shows the significant price move higher from mid-2012 to the third quarter of 2015.  Since then the stock has traded down BUT in a range of pricing that allows for short term trades.  Some clients have started to initiate positions and I would be a buyer right to the $8 range (dashed green line).  The target would be $10 minimum with a possibility of $11-12 depending on energy prices and time (LOW PRICE TARGET AMONG ANALYST IS 12$ AT THIS TIME)

This individual security may be appropriate for a portion of the portfolio that is not needed for current cash flow (next 3-4 years). 

If you are interested or want more information please contact me to discuss.

 

 

The next ‘opportunity’ is a Corporate BOND is by Freeport-McMoRan. I have taken this idea from the SIGNATURE investment team (see below)

 

 

Opportunity – credit at a discount – Freeport-McMoRan

  • The largest producer of copper in the world with costs below spot rates and some of the highest quality mines in the world.

  • The potential of a downgrade into high yield and the broader commodity sell-off has pushed investors into a “sell at any level” mentality. We began buying in late 2015, after stresses had emerged and prices had fallen substantially. FCX will generate $1.5bn in free cash flow next year, despite weak prices.

Bonds are trading in a range of 50-60 cents – well below levels in the financial crisis and implying a valuation of 2.5x 2016 cash flow. Yields range from 13-18% for bonds in the 6-10 year range

 

 

While they talk about the longer dated bonds (6-10) years I have looked into the shorter term bonds (1-5 years).

 

 

FXC 2.15 03/01/17     90.50 / 11.58 YTW/YTM ***

FXC 2.375 03/15/18   76.50 / 15.525% ***

FXC 3.1 03/15/20        62.50  / 15.68%

FXC 6.5 11/15/20        68.50  / 16.11%

 

The 1 year bond has a total rate of return of close to 11% while the 2 year bond has an average return of 15%.  I put considerable faith in the SIGNATURE TEAM so for certain accounts this may be appropriate (contact me to discuss)

 

Because of last week’s drop in global equity markets I am also going to update a few stocks that are held in some client account’s.

 

APPLE (BUY)

 

APPLE which has continued to fall during 2015.  As I pointed out when I first discussed this stock we would add to the position if prices continued to move lower.  The stock has moved lower and should be added to.  Based on my charts the target price is in the $110 to $115 and I suggest selling at that point.

 

 

SCOTIA BANK (BUY)

 

For those looking for something closer to home and on almost every corner there is Scotia Bank.  The stock has struggled this year and may have been the worst Canadian Bank in 2015.  This stock is a buy at this level and a possible sell in the $59-61 range.

 

The CHART OF THE WEEK a couple of weeks ago was DISNEY.  The stock has fallen since my initial suggestion (in line with the market) but in the original suggestion I gave additional prices we would add to positions at.  We have reached the first of those prices so those with a position could add at this time.  The target price is in the $115 range at this time.

I continue to suggest the BMO equal weigh US Banks instead of individual banks at this time since it is CURRENCY NEUTRAL and will not suffer if the CDN$ has a near term reversal (don’t hold your breath though).  Buying at this level and selling in the $21 range (short term resistance) would be the current strategy.

If you have any questions or concerns please e-mail me or contact the office for a meeting.

 

I encourage everyone who is still trying to accumulate assets for RETIREMENT to forward their year-end pay information to do a ‘trial tax return’ BEFORE the RRSP deadline (end of February).

 

 

 

 

The views expressed do not necessarily reflect the opinion of Argosy Securities Inc. This does not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. Please consult a professional before making an investment decision.

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