Hap Sneddon, president and chief portfolio manager, Castlemoore

FOCUS: Technical analysis

MARKET OUTLOOK:

Corporate earnings are decent, with analysts raising their first-quarter consensus to six per cent from 5.7 per cent, their second quarter and third quarter to 9.3 per cent from 9.2 per cent, and their fourth quarter to 17.6 per cent from 17.4 per cent. The full-year number moved to 11.4 per cent from 11.1 per cent. We’re seeing similar raised guidance on revenues too.

At this time of year, seasonality ushers in typical broad market weakness, however, this being a U.S. presidential election year, it’s different. The historical pattern shows a bullish turn from June to just before the election in early fall.

While volatility is expected to increase near the election, now ever-present investor concerns around rates and inflation have created tension today between opportunities in both commodity-based and tech-based growth investments.

Investing is not easy if we are always trying to figure out the world from a top-down perspective first before we act, instead of recognizing strength in individual businesses or themes. Sound portfolios are often arrived at by holding a collection of good ideas that would have never seemed like a suitable mix if you had tried to construct it all at once from your understanding of the world. It’s okay for a portfolio to look like a dog’s breakfast if it’s working.

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TOP PICKS:

Schneider Electric SE (SBGSY OTC)  

Schneider Electric SE is a France-based company that provides medium voltage, low voltage and secure energy, and automation systems globally. It focuses on the digital transformation of energy management and automation in residences, buildings, data centers, infrastructures, and industries. The company’s ecosystem allows it to collaborate on its open platform with partners, integrators, and developers to offer its customers both control and operational efficiency in real-time. Cash flow has increased 36 per cent on a one year look and 63 per cent on a two year. Ownership is 89 per cent institutional and fund. Technically the stock has a good long-term profile.

Costco Wholesale Corporation (COST NASD)

Everyone knows Costco, but here’s its scope: the company operates 861 warehouses, including 591 in the United States and Puerto Rico, 107 in Canada and many more across the world. It also operates e-commerce sites in most of those countries. The business has a proven formula of success that crosses borders and that has little direct competition, especially abroad, implying a long runway of growth. Since day one, Costco has rewarded shareholders through sensible organic reinvestments in pricing and expansion. The stock is technically sound on all time frames and can cut through all economic environments.

Chemtrade Logistics Income Fund  (CHE.UN TSX)

Chemtrade Logistics Income Fund provides industrial chemicals and services to customers in North America and around the globe. Its business lines are sulphur (industrial) and water chemicals (water treatment), and electrochemicals (industry, batteries). Recent earnings beat the street by 10 per cent and saw margins at a healthy 26.3 per cent. The robust start to the year, coupled with good visibility, allowed the company to raise guidance to the upper end of the range. Its high payout (economic efficiency), focused business, and smaller size make it an attractive, and easy, target for a takeover. The technical picture on the daily, weekly, monthly, and quarterly are all positive.

 PAST PICKS: APRIL 4, 2023

Palo Alto Networks (PANW NASD)

• Then: US$196.56
• Now: US$306.09
• Return: 56%
• Total Return: 56%

Palantir Technologies (PLTR NYSE)

• Then: US$8.35
• Now: US$20.83
• Return: 149%
• Total Return: 149%

Berkshire Hathaway (BRK.B NYSE)

• Then: US$309.07
• Now: US$402.06
• Return: 30%
• Total Return: 30%

Total Return Average: 78%