Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
Where the father of Modern Portfolio Theory, Harry Markowitz, is invested
The Globe and Mail recently spoke with the Nobel Prize winner about his contribution to the investment field by diversifying with inversely correlated assets to lower risk and what stocks he is picking.
“One-third of my stock holdings are in an ETF [exchange-traded fund] that tracks small-cap stocks and one-third is in an ETF that tracks emerging markets. This is the passive and diversified part. Rounding out my equity holdings is the active part: the one-third in several big-cap, construction-related stocks: Weyerhaeuser, Caterpillar, 3M, and United Technologies.”
He purchased the construction stocks in 2017 after hurricanes and tornadoes hit Puerto Rico, Florida and Texas believing the rebuilding effort would benefit those companies.
Read also: Taking stock of your stocks amid record highs and an unprecedented economic run
Plus: Investors are paying a high price for ‘safety’
Three Canadian stocks you’ve probably never heard of that analysts absolutely adore
Investing in stocks outside of major indexes is a little like shopping at a dollar store – while you need to be picky, you can find comparable quality at steep discounts, Tim Shufelt writes. There can be good value among the overlooked, but also many potential hazards. The pool of nearly 4,000 stocks listed in Canada is littered with risky junior resource plays, micro caps and penny stocks that the average investor would be wise to rebuff. As a shortcut to finding safer stocks, we used sell-side stock ratings to screen for lesser-known names outside the S&P/TSX with a high level of analyst support. Three stocks emerged from the masses: Tamarack Valley Energy, Tidewater Midstream and Infrastructure, and Champion Iron. Here’s why.
Four steps investors can take to prepare for the next market downturn
With stocks hitting new record highs and the bull market nearly a decade old, it may seem like an odd time to think about the next downturn, writes John Reese, CEO of Validea.com. But as the old saying goes, hope for the best and prepare for the worst. Because there is no easy way to predict with certainty the coming of a bear market, it’s best to start thinking about the next one long before conditions start to deteriorate. Here are four steps investors can take to help prepare for the next downturn, even though markets are riding high right now. They include assessing your pain threshold: What would your reaction would if the bottom suddenly dropped out – as it did in this past December?
Read also: Where can investors turn as market jitters grow? History says: stocks
Short sales on the TSX: What bearish investors are betting against
Companies with a substantial number of shares sold short tend to underperform, according to academic studies, Larry MacDonald writes. So, if you have a long position in such a company, you might want to double-check your thesis. Or, if you do short sales of your own, screening for such companies may generate a few trading ideas. The first of two tables here shows Canadian companies with the highest percentage of shares sold short as of mid-July, and it’s well populated with firms in the cannabis and housing-related sectors. The second shows the 10 companies with the biggest increases in short positions over the month to July 17, which highlights mostly larger companies including Enbridge, TD and BCE.
Read also: The week’s most oversold and overbought stocks on the TSX
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From Gordon Pape’s mailbag: GIC benefits, Mawer funds, TFSA withdrawals and other investing dilemmas
A reader asks Gordon Pape: You recently recommended the Mawer Balanced Fund. I like the fund and own a lot of it. Do you have a couple of other balanced funds that you like and recommend … or should an investor simply put all their funds in the one company’s balanced fund?
His response: The only reason to own two funds in the same category (in this case global neutral Balanced) is if they use a different investment approach to achieve superior results. The best fund I can find that would complement the Mawer fund in that way is Dynamic Power Global Balanced Class Series A, managed by Noah Blackstein. As of June 30, it showed a 10-year average annual compound rate of return of 10.1 per cent. The asset allocation is about the same as the Mawer fund (60 per cent equities, 40 per cent bonds and cash). But the geographic and sector allocations are very different.
He answers more questions here.
John Heinzl answers questions in this week’s Investor Clinic: The problem with five-year GICs, and the right way to sell Bombardier shares
What investors need to know for the week ahead
In the week ahead, eyes will be on the U.S. Federal Reserve, which is widely expected to announce at interest rate cut on Wednesday at the end of its two-day meeting.
U.S. and China trade talks are set to resume in Shanghai on Tuesday. Canada’s Real GDP at Basic Prices for May will be released Wednesday morning. The U.S. employment report for July will be released Friday. Consensus is a rise of 166,000 from June with an unemployment rate of 3.7 per cent (unchanged).
Companies reporting earnings in the week ahead include Beyond Meat, Nutrien and Capital Power (Monday), Air Canada, Amgen, Apple, BP, Bayer, ConocoPhillips, Detour Gold, Mastercard, Merck & Company, Pfizer, Procter & Gamble, Stelco Holdings and WestJest Airlines (Tuesday), Brookfield Business Partners, Brookfield Renewable Partners, Cargojet, General Electric, Great-West Lifeco, Kinross Gold, Kraft Heinz, Sprint and Sun Life Financial (Wednesday), AltaGas, Aphria, Bombardier, DuPont, Maple Leaf Foods, Open Text, SNC-Lavalin, Shopify, TC Energy and Thomson Reuters (Thursday), Berkshire Hathaway, Enbridge, Exxon Mobile, Fortis, Power Corp., Restaurant Brands International, Riocan and Telus (Friday).
Read also: Don’t fight the tide, just ride it: World market themes for the week ahead
Looking for more investing ideas and opinions?
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How the 5% rule changes the rent vs. buy debate
Outperforming 15-stock Canadian portfolio built on analysts’ recommendations
Protect your retirement portfolio from ‘drawdown’ erosion
Unique retirement planning strategies needed for defined-benefit pension plan members
An investor’s take on a hot trend in advice fees: ‘The value added is negligible’
‘What can I do to better prepare for an awesome retirement experience?’