…Mr. Wong says that outside his core positions, he often looks to add “satellite” investments that have the potential to provide superior returns in client portfolios. This allows him to consider fascinating investment trends and themes that have the potential to be the next Amazon, Facebook or Visa.
Mr. Wong says investing in disruptive and nascent industries such as robotics and artificial intelligence fits that strategy. He believes factors such as aging populations and increasing labour costs will lead to a “rise of the machines” over the next decade. Some of the industries that are expected to be most impacted by AI include manufacturing, military and defence, health care, transportation and agriculture.
The Global X Robotics & Artificial Intelligence ETF is Mr. Wong’s preferred way to play this trend. Nearly 75 per cent of the portfolio is allocated to companies in Japan and the United States that are considered to be leaders in the robotics and AI theme. Top company holdings include Nvidia Corp., Mitsubishi Electric Corp., Intuitive Surgical Inc. and iRobot Corp. Over the past 12 months, the fund has provided a 40-per-cent return…
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As we approach the end of summer, U.S. equity markets have recently stalled amidst geopolitical tensions and White House turmoil. Yet, fundamentals such as positive economic data and solid corporate earnings have largely been overshadowed by the negative political headlines. While valuations remain somewhat extended, continued corporate earnings growth and positive economic news globally should help push stocks higher. Should the White House at some point be successful in passing its much-anticipated tax reform and deregulation policies, this would further rally U.S. equities higher.
In Canada, the TSX continues to be a laggard with energy prices remaining weak and the softening housing market casting an uncertain shadow on the economy. The precarious outcome of the NAFTA renegotiations has also caused some uncertainty for Canadian equity investors. Going forward, we will need to see signs of a countertrend rally in energy prices, clarity surrounding future trade with the U.S. and data that indicates a more balanced housing market for the TSX to reverse course and move higher.
When looking at international markets, economic and market data continue to improve in all major regions. In Europe, we are seeing accelerating economic expansion and a steady earnings outlook. In Asia, the region’s backdrop appears encouraging with China and Japan still indicating solid economic growth and improved corporate earnings. Lastly, the emerging markets look attractive with economic reforms, stronger corporate fundamentals and reasonable valuations supportive of equity prices. Indeed, international equity markets (with lower price-earnings and price-to-book multiples and higher dividend yields) currently appear more compelling than North American equity markets from a valuation screen.
In Stan Wong Managed Portfolios, we are overweight in the financials, technology and consumer discretionary sectors while underweight defensive areas such as utilities, real estate and consumer staples. We also generally favour high-quality stocks and expect dividend growers to outperform dividend payers. We are balanced between growth and value stocks but expect value stocks to eventually outpace growth stocks over the intermediate term as interest rates move higher. We continue to add to international equity markets as we expect these positions to generally outperform North American equity markets based on relative valuation metrics. As expected, we have seen an uptick in market volatility lately and expect it to remain elevated moving forward. This will provide us with buying opportunities as we believe that the strategy of “buying on the dips” remains prudent.
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