Three top stock picks from CastleMoore’s Hap Sneddon – The Globe and Mail – Mar 17 2016
We have consistently held to the thesis since 2007 that the major theme in Western markets is deflation. With U.S. quantitative easing and the first rate hike of a supposed 3-4 more to come, interference in market price discovery has been reduced. The initial reaction has been a strong bid in defensive sectors, areas that are showing positive absolute and relative strength, followed by a reflective up-move in dollar-sensitive and heavily-shorted sectors. The key during the next year will be ensure a “barbell” approach to risk by adjusting the balance of asset and sector allocations. Defensive holdings, such as longer-dated bonds, utilities, consumer staples and infrastructure for example, will provide portfolios with a stable, trending core, while more pro-cyclical areas such as energy, industrials and technology need to be strong individual securities (sector outliers) or the sectors must be bought on weakness for a rental. Spreading out risk in this way, combined with active management, will support positive absolute returns one year from now.