Investment Q&A

Q: 5i Team,

Happy Holidays. I ask this question every other quarter, whenever I am repositioning my portfolio and deploying new cash. Given what has gone on in the energy space, what would be your ideal target sector weightings for a portfolio going into 2015 using these 5i recommended sector classifications, assuming a blank slate:

Capital Goods / Industrials
Consumer Cyclical
Consumer Staples
Retail
Energy
Financials
Health Care
Information Technology
Internet / Software
Materials (Gold, Silver etc.)
Materials (Paper, Chemical, Steels, etc._
Real Estate
Telecommunication Services
Transportation
Utilities
TOTAL = 100%

Risk tolerance is 7.5 out of 10. Assume a market cap portfolio mix of approx. 15%-20% small cap, 35-40% mid cap, 45% large cap.

Thanks and Happy Holidays!

Q: Hello Peter,

What is your view on current market valuations versus risk? In general prices look pretty fully valued right now especially in the US. I'm holding some cash right now but hesitant to buy more at this point as risk/reward profile looks a little shaky.

Are you continuing to buy at these market levels?

Q: Peter,
This is the latest (Dec19) expected consensus earnings (in %) for 2015 S&P (all revised down from the last one by the way except financials)
Financials +17.6
Cons. discretionary +16.8
Materials +14.8
Tech +11.3
Health +10.8
Industrials +9.7
Cons staples +6.8
Energy -20.4

My question: I have not been able to find the same info for Canada ( a recurring problem for me) but could this US info be used as a proxy for Canada. (my take? not for all)
Thanks for that

Q: (sorry, i was unable to enter thus question without entering a symbol)
Would you please comment on 3 things... 1 What industries in Canada other than airlines will most benefit over the next while by the drop in oil..2 same question for US market and 3 what foreign country etf ( eg,EWG? ) would most benefit by the drop in oil?

Q: Hi Peter and team, Early in the morning I sent you 2 questions: one about PKI which was answered in no time (thank you) and another one w/a link to this article, but had no reply:

http://www.thetradingreport.com/2014/12/10/guess-what-happened-the-last-time-commodity-prices-crashed-like-this/

I don’t want to sound pushy......just wondering if you got it? In case you didn’t get it, I was asking for your opinion of the article. It actually feels like 2008 (as a member said today in a question he asked). Should we be worried/prepared? How do you think precious metals will perform if such a scenario will occur?

I’ve chosen the option for other 5i members to view it, but I leave to you if you want to post it or just answer to my email.

Thank you again!

Q: GS has issued a "SELL CANADA" statement(recommendation?) that has been mentioned on BNN numerous times in the last several days. What does this mean? Is GS powerfull enough to add to the selling pressure on the TSX? Thank You Ron

Q: Hi guys, my percentage weighting of my stocks fluctuates every day based on the previous days close of the stocks price. So if the stock is down one day it will have a 5% weighting and if is up the next day it might have a 6% or even a 7%weighting. Is that common, or is there a better way to figure out the accurate weighting of each stock. Thanks, Nick

Q: Hi Peter,
Is there a rule(s) that you use to determine when to sell a losing position? I seem to always let certain positions drop 50%+, end up getting frustrated and selling. Some of my current losers include ARE, LOY.V, AVO, SGY. All are approaching 50% loses. On the flip side, what rule(s) do you use to determine when to sell a winning position? Thanks for all you do.

Q: Peter and Team,

Of my invested assets, I currently have 2.5% cash, 5% bonds (CBO ishares ETF), and 92.5% in stocks. The stock portfolio is diversified as I have tried to model after 5i methodology. I do have other cash outside of my current invested assets that amounts to the equivalent of approximately 25% of my invested assets.

I have been trying to increase my allocation to bonds a little bit because I like yield and feel like my allocation to bonds should be higher than it is for risk-management purposes.

My question is two fold:
1. I am 32 and wondering what allocation I should have to bonds?
2. Is there a bond or other yield vehicle that is similar to CBO that is exposed to international companies or companies that get earnings from international sources like Brazil, India, China, etc. I like CBO because it is short (less than 5 years) duration corporates.

My expectation is to trim some huge winners in the stock portfolio soon that will give me approximately 5% more of the portfolio to put into my fixed income allocation.

PS. I'd also consider floating rate stuff or things that reset with LIBOR or things of that nature as well.

Thanks!

Marc

Q: Hello Peter, Ryan et al, I am with Paul K all the way. At over 70, retired, I have no where else to go for income with reasonable safety but banks, utilities, pipelines, REITs etc (throw in BEP.UN and BIP.UN). Fixed income? Bah! (I still have a few GIC's going to maturity). For sure, I have stuck my neck out and have a few stocks like ACQ, HLF, EH AFN etc. As for our golden years,we've been led to a place that is not what we expected to be (not your fault). I have a different take. As an INCOME INVESTER (there are very few of us left), I worry about, look at, first and foremost 'INCOME'. That means that if income keeps up with inflation (pray that it be low), I don't worry so much about what happens to the capital. There have been periods in the past when the value of stocks had gone down but the income kept up with inflation. So, the question is: would a portfolio of cashflow generaters that pay out most of it and growing the cashflow going forward be OK for someone like me? Yours with fingers crossed, Henry

Q: I am trying to establish an asset allocation program. I am 74 yrs old have some money in RRIF act's professionally managed and some money I manage myself. My desired return for my self managed portfolio is 5-7% with medium risk tolerance. Please suggest an appropriate allocation.

Q: Since certain sectors (such as Energy) have fallen so much, do you recommend people rotate to keep portfolio weightings in check from before? For example, I had about a 10% weighting in energy before the sector meltdown, so it's closer to 5% now. Should I reduce some weightings in others (eg. consumer staples, tech, etc) to bump up Energy? I would plan to reshuffle after a recovery...

Thanks!

Q: Sector rotation keeps coming up in various posts. I sense you agree.

Clearly there is a rotation out of energy. Any other sectors?

And where is the smart money going? And what would be the top couple of names in each of those "rotated into" sectors?

Thank you.

Q: Good afternoon,

US discretionary spending is indicted to rise with oil dropping, wmt is hitting new highs in anticipation. I consider a moderate risk investment in light of "new money" theoretically ready to deploy. What are your thoughts, where will Canadians spend if discretionary spending increases, will they payoff debt ( bad for banks), would they spend on credit with increased sentiment on repay ability (good for banks, magna, cineplex).. where would you invest in light of the economic change?

Thanks,

Eric

Q: Hi Peter,

I'm down considerably on the above names.
Would it makes sens to sale them now for tax purposes and
buy something equivalent for the next 30 days, so if a pop up happens I won't be out in the cold.

What do you think about this strategy and do you have any equivalent replacements?

Thanks
M

Q: Hi Peter and Staff
I choose so far to hold a lot of stocks in each sector(doing my own ETF I guess) .This is so you know that the industry each of the companies are in below in relation to my overall portfolio % wise is not an issue in making your recommendation.
Would you please look at the two lists below and if you feel worthwhile to dump 2 or 3 of the ones I own in favour of 2 or 3 of the ones various people recommend in the other list, please say so in order of trades,brief explanation as to why please.You can assume no rush to realize benefits,assume 10 years
POSSIBLE DUMPS
AIM,CHE.UN,CJR.B,DII.B,MTL,NWC,PZA,XSR,TPK
POSSIBLE ADDS
ADW.A,ADN,AGT,CSW.A,KBL,KPT,LNF,RUS,TRI,WEF

You can safely assume that I do already own the stocks with reasonable dividend levels in these sectors that are in your model portfolio.
Thanks for all you do
Dennis

Q: How much value does your team place on technical analysis. A large number of energy related stocks have violated all moving averages recently. Does that mean we should not buy them until they move back up significantly

Q: What is the best strategy to protect against a major market decline ? I am concerned that the stock market as a whole may be in bubble territory and that we may see another major decline like we did after the shocks in 2000 and 2007. In response to similar questions from Heather and Charles on Oct 1 and 2 you suggested that investors should hang in there for the long haul. Are you still of the same view or is there a safety net you would recommend ?

By way of background, in the period from 1995 to 2000 the S&P 500 went from 500 to 1500. After the tech collapse, it sold off to a low of around 800 in 2002 (-45%). Over the next 5 years of recovery, the index went back up to 1500 in 2007, but then collapsed again to around 800 in 2009. We are once again in the 5th year of a bull run, with the S&P shooting past 1500 to its current all-time high of over 2000.

Q: Peter,

Would you please comment on someone in their early sixties maintaining their portfolio by investing in ETF's compared to individual companies.

Thanks

Q: Hello 5i,
I will be building out the bond part of my portfolio in time. My thinking is to structure that part of the portfolio with BB- to BB+ bonds that have a time horizon of eight years max.

What do you think of this strategy?
Thanks,