Below are Evergreen Gavekal's Likes/Dislikes for March 13, 2020.
OUR CURRENT LIKES AND DISLIKES
Changes highlighted in bold.
- Large-cap growth (focus on lower P/E issues within this style; i.e., “growth at a reasonable price”; use the bear market to do more accumulating)
- Some international developed markets, especially Japan (Continue buying but slowly due to the possibility of worsening news on the virus.)
- Publicly-traded pipeline partnerships (MLPs and other mid-stream energy securities) yielding 7%-15% (due to this sector’s utter collapse, we feel it is now appropriate to accelerate accumulation)
- Gold-mining stocks (another sharp correction offers a good long-term entry point; they are trading at 2018 levels with a 30% higher gold price and 50% lower energy costs.)
- Gold (also step up the pace of buying)
- Silver (same as gold; silver has been hit even harder)
- Select international blue chip oil stocks (same as with MLPs, it’s time to get more aggressive)
- One- to two-year Treasury notes
- Short-term investment grade corporate bonds (1-2 year maturities)
- Emerging market (EM) bonds in local currency
- Large-cap value (As with Large Cap Growth, the recent swoon into bear market territory provides an attractive entry point in many stocks. Most cyclical issues have been hard hit by coronavirus fears and offer long-term upside.)
- Intermediate-term Treasury bonds (hold off on further buying due to the big rally this year)
- Copper producers (the damaging effect of the coronavirus on Copper demand could be high in the short term, but the fundamentals of Copper supply/demand remain attractive long term. Copper could also have a very sharp rally if fears are calmed)
- High-dividend yield equities with safe distributions (as interest rates disappear, investors will go searching for yield; as with large cap value and international energy shares, moderate buying for now due to the recent rally)
- Most cyclical resource-based stocks (in most cases, these have been very hard hit, as well
- BB-rated corporate bonds (due to the dramatic spread-widening that we expected and has happened with a vengeance, we are bumping up these two notches but this is another “buy slowly” situation).
- Small-cap value
- Mid-cap value
- Emerging stock markets; however, a number of Asian developing markets look undervalued (S. Korea looks particularly interesting)
- Canadian REITs (like all REITS, they have fallen lately and look more attractive)
- Intermediate-term investment-grade corporate bonds, yielding approximately 4% (these are beginning to offer more appeal due to spread widening)
- US-based Real Estate Investment Trusts (REITs)
- Long-term investment grade corporate bonds (same as with intermediate issues)
- Preferred stocks (some US bank preferred stocks look like buys after the recent drop; again, buy slowly)
- Solar Yield Cos (PG&E risk is rising again; taking profits in one of the more Calif-exposed companies)
- Intermediate municipal bonds with strong credit ratings (a sudden sell-off has created some interesting values)
- Long-term municipal bonds
- Long-term Treasury bonds
- British pound currency
- Canadian dollar-denominated short-term bonds
- South Korean Equities (reducing exposure for now due to global economic risks)
- Japanese Yen
- Small-cap growth
- Mid-cap growth
- Lower-rated junk bonds
- Floating-rate bank debt (junk)
- European banks (these are ominously making new all-time lows)
- Investment-grade floating rate corporate bonds (reducing exposure to these as Fed rate cuts are increasingly likely)
- US dollar
- Traditionally “safe” sectors such as Staples and Utilities due to elevated debt and valuation concerns
- Many semi-conductor tech stocks which have surged in price over the last six months and generally trade at lofty prices despite falling earnings.
* Credit spreads are the difference between non-government bond interest rates and treasury yields.
(Note: based on the intense damage done to nearly all risk-assets lately, our negativity has eased even on the above “dislikes”)
DISCLOSURE: This material has been prepared or is distributed solely for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Any opinions, recommendations, and assumptions included in this presentation are based upon current market conditions, reflect our judgment as of the date of this presentation, and are subject to change. Past performance is no guarantee of future results. All investments involve risk including the loss of principal. All material presented is compiled from sources believed to be reliable, but accuracy cannot be guaranteed and Evergreen makes no representation as to its accuracy or completeness. Securities highlighted or discussed in this communication are mentioned for illustrative purposes only and are not a recommendation for these securities. Evergreen actively manages client portfolios and securities discussed in this communication may or may not be held in such portfolios at any given time.