Hap Sneddon, chief portfolio manager and founder, CastleMoore Inc.

FOCUS: Technical analysis 

MARKET OUTLOOK:

Inflation in Canada has slowed recently to 2.8 per cent, and in the U.S., to three per cent.  The highs in inflation crested in the spring of last year and markets, particularly the tech sector, troughed just a few months later. When we break down the components, energy (-3.4 per cent) and transportation costs (-3.5 per cent) fell the most. On the other hand, food (+8.3 per cent) and grocery (+9.1 per cent) saw continuing strength as did shelter (+4.8 per cent) and mortgage costs (+30.1 per cent).

While inflation has come down, at the same time U.S. 10-year Treasury yields are trending towards new highs at 4.1 per cent with a significant breakout level at 4.3 per cent. A look at long-term rates reveals a 40-year trend break of falling yields occurring in March of 2022. This suggests that the cost of capital has not yet been fully priced into the inflation data or equity prices. 

In the meantime, based on a positive technical read, stocks look to continue their strong run in the short term. The Nasdaq Composite and tech in general, has given way to better relative performance by the more industrial and economically sensitive areas of the Dow Jones Industrial Average and broader S&P 500 Index.

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TOP PICKS:

Amgen (AMGN NASD)

Last purchased on May 19, 2022, at $246.02      

After recent earnings saw the company increase its full-year 2023 guidance for revenue and earnings per share (EPS), investors were forced to re-evaluate this long-term performer. The company also made positive pipeline updates – the mother’s milk of biotech and pharma companies. The stock is in its seasonal sweet spot for entry and August has seen a new monthly bullish signal.

Berkshire Hathaway (BRK.B NYSE)

Last purchased on Nov. 26, 2021, at $288.06 

Getting a little help here and there from an excellent manager of assets is smart - we’ve got no ego when it comes to raising portfolio values. Monday saw the company report increased earnings. Especially noteworthy was the almost 75 per cent jump in insurance profits, in part from higher interest rates. Like us at CastleMoore rolling T-bills across large portions of each of our portfolio models, Buffet has been doing the same. Except he’s working with a $150 billion cash pile for future opportunities. Investors buying today should think very long-term and buy half their intended final allocation due to recent price advances.

AltaGas (ALA TSX)    

Last purchased on June 20, 2023, at $23.97

This solid, Canadian-based energy company focuses on all things natural gas including extraction and terminalling, gas field gathering and processing, power generation, utility distribution and energy management services. Recent earnings were decent, and the sale of assets will continue its debt repayment acceleration plan. A weekly break out in mid-July accompanies a nice 4.3 per cent dividend. 

PAST PICKS: June 5, 2023

ProShares UltraShort 20+ Year Treasury (TBT NYSEARCA)

• Then: US$30.22
• Now: US$32.69
• Return: 8%
• Total Return: 9%

Monster Beverage (MNST NASD)

• Then: US$59.26
• Now: US$57.95
• Return: -2%
• Total Return: -2%

Definity Financial (DFY TSX)

• Then: $37.00
• Now: $36.75
• Return: -1%
• Total Return: -0.2%

Total Return Average: 2%