ShareThisWhat does CastleMoore think its typical Canadian investors should be invested in NOW?
FOCUS MODERATE PORTFOLIO
The latest edition of the CastleMoore News is now available, and, objectively, it’s one of the best ones yet:
From Sheldon Liberman’s column:
We take for granted the idea that more risk = more return, less risk = less return, mass = energy, energy = mass. MPT says that, on average, a portfolio should do no better or worse than the overall market (however you define that), since its components are securities which collectively are the market. Markets are assumed to be efficient enough not to compensate investors for risk other than that associated with investing in the overall market. In other words, don’t take on more risk than the market is willing to pay for, for to do so makes your portfolio inefficient.
The key point here is that MPT does recognize market risk, but offers no method of eliminating or even reducing it. If you want to earn the market rate of return, diversify your portfolio enough to eliminate non-market (unsystematic) risk.
From Hap Sneddon’s column:
Lately, we’ve sat on a fair bit of cash, been in and out and back into bonds, analyzed a great deal of economic research for trends and scanned industries and securities, top down, all since March. We’ve been very busy thinking about strategy. Here’s why:
We developed a hypothesis several years ago that we would head into a strong period of deflation at some point in the future. Our methodology calls for us to move a hypothesis to a thesis and finally to action, as data and trend, either supportive or destructive, comes to the fore.
From Ken Norquay’s column:
One important structural problem with today’s stock market relates to Canadian and US corporate pension plans. The 2009 demise of
From Thomas Kleinschmidt’s column:
Said differently, without a selling strategy outside of bonds, you’re a gambler not an investor. “Ah, but with greater risk comes greater reward”, says the voice. This may be true in the long term, and/or with a thorough study of all the data and the requisite visit to the fortune teller, but there are no guarantee. The funny thing is that the more study and surety, the less risk! Sure the fortune teller might be questionable, but my point is that after a lot of study the true “risk” then comes from not hitting the brakes and relying on your air bags to stop.
Elsewhere, we have taken a position in TransAlta Corp. The yield is attractive and this is a company with strong management. They have delivered a stellar 5 yr ROI in excess of 100% during times. These factors should be of benefit should the correction we think is possible materializes.
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CastleMoore Inc. uses a proprietary Risk/Reward Matrix that places clients within one of 12 discretionary portfolios based on risk tolerance, investment objectives, income, net worth and past investing experience. For more information on our discipline and methodology please contact us.
CastleMoore Inc.
Buy, Hold…and Know When to Sell
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Discussions from the Tech Talk Forum:
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August 13th, 2009 at 4:59 am
Do you think that TransAlta will disappoint, moving forward? They have a history of reporting poor quarters, and the stock consequently gets hit. Also, any thoughts on its latest acquisition proposal?
August 13th, 2009 at 8:30 am
I’ve been watching the Castlemoore Focus Moderate Portfolio and have noticed that you have been out of equities for a long time and have missed the substantial rise in the stock market. However, on BNN’s Market Call, Castlemoore has been bullish on many stocks. What indicators are you watching to get back into the market?
August 13th, 2009 at 12:23 pm
Hi Chris;
Yes TA has had a history of disappointing expectations, but the ROI is over 100% for the last 5 years. Some points we considered:
- its fits well with our low growth/deflation thesis going forward
- dividend payments since 1956
- institutional ownership of 54%
- LTD to cap lower than peer group
- will get a FOREX bump going forward as the C$ rise has hurt earnings
- the KHD deal will probably fall through
- the risk-to-reward ratio is excellent – stop is the lows, with a P&F target around $30
Hap
August 13th, 2009 at 12:32 pm
Hi Michael;
While we have becoming slightly positive on the equity market, we are waiting for the overbought conditions to recede even if sentiment drives things higher still. Our long term track record against the indices, benchmark are peer group is good – we do not need to take exceptional risks as we sold at the top in the US and CDA last year. In addition, this market is very, very expensive on a trailing and forward P/E basis. We are watching the bullish sentiment which has shot up again and the bearish fallen again. These would both be contrarian indicators. To us, we would like to see how this market corrects, then place appropriate capital in a low growth/income-orientated environment – long gov’ts, select corp’s, stocks and trust units. When we are compelled as the sirens compel the sailors, we know its not the right time to make long term strategic investment choices.
Hap
August 17th, 2009 at 1:05 pm
Hap,
A really great call on TLT:
http://www.reuters.com/article/marketsNews/idINN1756693820090817?rpc=44