Below are Evergreen Gavekal’s Likes/Dislikes for March 27, 2020.
OUR CURRENT LIKES AND DISLIKES
Changes highlighted in bold.
LIKE- Large-cap growth (focus on lower P/E issues within this style; i.e., “growth at a reasonable price”; because of this week’s powerful rally, pause for now)
- Some international developed markets, especially Japan (Continue buying but slowly due to this week’s rally.)
- Publicly-traded pipeline partnerships (MLPs and other mid-stream energy securities) yielding something approaching infinity (due to this sector’s utter collapse, we feel it is now appropriate to accelerate accumulation; however, distribution cuts are spreading due to the unprecedented collapse in energy demand)
- Gold-mining stocks (despite a big up-move this week, most still look attractive)
- Gold (also step up the pace of buying)
- Silver (same as gold; silver has been hit even harder)
- Select international blue chip oil stocks (because of a strong up-move this week, notwithstanding today, buy more slowly and selectively)
- Short-term investment grade corporate bonds (1-2 year maturities)
- Emerging market (EM) bonds in local currency
- Large-cap value (buy more carefully now due to the aforementioned rally)
- 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)
- Most cyclical resource-based stocks (again, buy more carefully but considerable long-term upside remains)
- BB-rated corporate bonds (due to the dramatic spread-widening that we expected and has happened with a vengeance, we are bumping these up two notches but this is another “buy slowly” situation).
- A wide range of high-income securities that have been crushed by the global margin call, including preferred stocks (many of these have surged so buy less aggressively)
- Canadian REITs (these, too, fall under the crushed category, though, again, there’s been a notable recovery)
- Intermediate municipal bonds with strong credit ratings (both intermediate-term and long-term muni bonds have had big rallies; we are less enthusiastic, as a result)
- Long-term municipal bonds
- South Korean Equities (this market has been pounded, offering excellent long-term value but, they have also been strong performers this week; S. Korea is far ahead of the west in seeing its infection rate decline.)
- Long-term investment grade corporate bonds (the Fed’s declared intention to buy corporate bonds has made these much less appealing though some bargain remain)
- Solar Yield Cos (the leading entity in this sub-sector has been slammed along with nearly all yield plays and is once again attractive)
- Small-cap value
- Mid-cap value
- Emerging stock markets; however, a number of Asian developing markets look undervalued
- Intermediate-term investment-grade corporate bonds, yielding approximately 4%
- US-based Real Estate Investment Trusts (REITs)
- Cash
- Long-term Treasury bonds
- British pound currency
- Canadian dollar-denominated short-term bonds
- Japanese Yen
- Small-cap growth
- Mid-cap growth
- Lower-rated junk bonds
- Floating-rate bank debt (junk)
- Intermediate-term Treasury bonds
- One- to two-year Treasury notes
- 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 (The unprecedented size of the rescue package funded by debt is likely to put downward pressure on the dollar once this crisis passes)
- 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.