Past picks and looking forward

February 9, 202112 Comments

Today, I’d like to look at some of the calls I have made on this blog over the past year or so, and see where I was right, or wrong. I am a big believer in accountability in all aspects of life. As a lifelong athlete (bicycle racer for 40 years), I know that you must be accountable to yourself with your training regime, or you wont get the results. Same goes with investing.

So, how have my “past picks” from this blog done over the past year? And what’s next? Well, lets take a quick trip through time and see how I have fared.

 

Good calls

Bullish Energy: At ValueTrend, we began buying energy when everyone else hated it. I blogged on that as a contrarian opportunity when WTI traded near $40 in early October, here in NovemberDecember, etc.  I targeted (and still do) $65, per the chart below. We were right…energy has popped..its $58 today. So far, so good.

Bullish value and metals: Way back in May and June of 2020, when the love affair was full boar on the tech sector, and nobody loved value or commodities – I wrote a strongly noted series of blogs encouraging people to move into value and reflation stocks. At ValueTrend, we went into these stocks fairly aggressively.  Here, here, here are examples of the blogs–although I wrote many more on the topic. I was right on this one as well. The chart below is the XME metals & mining ETF. I hope you were in on the trade.

Bearish FAANGs and “stay inside” stocks: In August of 2020, the FAANGs and stay inside stocks peaked. The FAANGs have largely traded sideways since (Google outperformed but the rest flatlined), and the inside stocks like Zoom and Peloton got spanked. I blogged on that peak with decent accuracy in early September here. I was correct on that call, albeit early, given that we began selling tech to buy reflation stocks in June and July – they peaked in late August (see my final comment). Below is the Amazon sideways pattern to date.

Neutral call

Staying calm during the storm: In the heat of the market crash, March 16th, I wrote a blog urging that investors do NOT panic. Markets would return to normal when we got a MACD signal, which looked close to happening. I quoted Jason Goepfert of Sentimentrader, who had a similar view: “Virtually everything we’ve looked at suggests a strong probability of gains over the next several months, even within the context of a potential bear market.” I was right about not panicking.

One thing I got wrong was the time it would take to see a recovery. My prognosis was based on historical bottoms after a crash. Typically, markets form complex consolidation patterns rather than reverse in a “V”. I wasn’t alone on that. I, along with many technical analysts, was/were wrong. For this reason, we bought back in slowly that spring, although history now tells us that it turned out to be one of the rare “V” reversals seen after market crashes. The chart below illustrates the 2009 crash and complex bottom, along with a diverging MACD signal.

 

Had my crystal ball worked, I would have gone “all in” rather than in stages. I’ll give myself kudos for urging investors not to sell, but a thumbs down for not recognizing the potential for a “V” bottom rather than a consolidation, given the sharpness of the selloff. Chart of the March 2020 crash below–note the complete lack of consolidation. Live and learn!

 

Bad calls

Bearish loonie: In January of 2020, I went on BNN and wrote a blog stating that I thought the tug of war between bullish and bearish factors for the CDN$ would keep it contained to about $0.77. I was wrong. The loonie went on to nearly hit $079. Its $0.7870 as I write this. So, have I learned anything here? Clearly not! I have simply moved my target for the loonie a bit higher. I am now more bullish on the loonie due to my bullish view on energy, but we still have a government who (for so many reasons) lags behind the USA & other countries in employment , vaccine distribution, fiscal responsibility, and economy . Click those links to learn the entire story. I still don’t think it will materially breach $0.80 vs. the USD. We shall see.

FAANG influence on markets: In July, I was becoming cautious on the tech stocks. I was early…they didn’t peak until August. As such, we sold our tech holdings early and underperformed for the middle part of the year. We made up for that in the latter half of the year when our value and commodity positions legitimized our stance. The one thing I got wrong was my view that the tech stocks and inside stocks would negatively impact the performance of the SPX. Their weight was so high in that index that it made sense that if they slowed, the market would slow. Clearly, the rotation out of those names and into other sectors allowed the index to continue higher. I got that call wrong. The SPX is at all time highs. Still, I don’t mind holding the sectors that have outperformed the index..metals, oil, value stocks. I was wrong about the index, but right about the outperformers.

 

Final thoughts

One of the reasons for posting this accountability blog, or to regularly post our performance numbers online at ValueTrend is to be accountable. Many Portfolio Management firms don’t post their results. We differ. We want to illustrate how we are meeting our objectives within the various managed accounts we run on behalf of our clients. Our goal is to succeed in meeting the objectives of each of our investment strategies within various market environments – not just when times are good. You can check our progress by following our Conservative strategy (ValueTrend Equity Platform), our Aggressive strategy (ValueTrend Aggressive Strategy) and our Income strategy (ValueTrend Income Platform) online.  Click on the performance tab on our homepage. Clearly, the aggressive strategy will have a greater risk/reward profile than the other two platforms. The income platform, being about 45% fixed income and cash, will be less volatile, but less rewarding due to its safety and liquidity objectives. The Equity Platform will typically provide a conservative level of growth that beats an income strategy yet manages risk far better than most traditional equity buy and hold strategies. As always, you are invited to contact us if you seek guidance in todays uncertain markets.

12 Comments

  • Hi Keith, I appreciate your openness and accountability. Look forward to more regular (monthly?) updates in the future. Take care!

    Reply
  • pat yourself on the back, you still had a winning strategy.

    Would appreciate your comments on ESG!

    Can not believe the charts on clean energy, PBW – Tan – QCLN.

    Take good care, bob.

    Reply
  • Honesty and voluntary accountability is super appreciated Keith. Thanks to you and your colleagues for the good work. I’m a short term trader more than an investor, but I truly value longer term opinion and analysis from a few Technical analysis professionals (you are one of the few ones !!!).

    Reply
  • Good old Justy Trudeau could take a lesson from this but we’ll never see it…. thanks for showing both sides Keith. There is a lot of legitimate traction in bitcoin and crypto’s. It is here to stay in one form or another- is there a way to play the trade on crypto vs the product itself that you would recommend? There are trading platforms available but interested in what you think. Enjoy your blogs..keep them coming.

    Reply
    • Yes David–it would be so nice to see the deceit and blundering stop. But hey, he has a nice soft voice and great hair. That seems to be what’s important to voters these days.
      As far as crypto currencies, I am the last guy to ask. I haven’t traded that sector, and honestly I have taken no time to understand it.

      Reply
  • Hi Keith,

    There are so many tweets about small-caps and many people following and liking tweets from those popular accounts (Accounts with 75k followers or more. Ex: TraderStewie). At the same time, small-caps are trading far from their 200 moving averages. Maybe as far as ever. Add to this the $CPCE is at 0.37 and its 20 moving average at 41. Other than weed stocks (today) they continue to go higher at violent speeds. Traders say not to worry, that when the time comes to sell, we’ll see the trend break. They say that in history, when the market cracked, it never happens quickly. That you have time to see it weaken. I hope that’s true. I want to believe that this historical strength in small caps is a fundamentally understandable, given the central bank liquidity is stronger than ever.

    Good luck to us all 🙂
    Matt

    Reply
    • You’re a smart guy Matt. IWM is horribly overbought. Its likely very close to a correction, and it may in turn influence the larger capped stocks. Feb can be a bit slow in the final 2 weeks from a seasonal perspective. so, it wont surprise me to see the small caps take a step back. Hopefully, that is all it is. Mind you, I don’t hold any small caps in my conservative platform and not too much in the ValueTrend Aggressive strategy.

      Reply
  • Hi Keith, you mention in the video that you expect to see inflation return but you also said you expect a rotation into utilities later this year. Please excuse my ignorance I’m a young guy in my 30s and have never witnessed inflation but from what I’ve read utilities are usually sensitive to rate hikes and don’t perform as well in inflationary environments. Maybe I have been misinformed. Could you possibly cover this at some point. Thanks again for the content. The videos are a nice touch as well.
    Kind regards,
    Shawn

    Reply
    • Shawn that question isnt that of ignorance at all. You are correct in that utilities are interest rate sensitive and rising rates hinder their profitability. This, because they really dont get much in the way of “growth”, so costs are the major factor to profitability. High debt means interest rate cost on that debt is important.
      So–why would i be bullish on utilities AND reflation stocks? Great question!!
      Reflation is a long view–one+ year out. When inflation happens, rates will rise –but not quickly. They rise over time. It will be gradual. So I have a long view on commodities (1+ year)
      Meanwhile, rates are not going to rise any time soon, and inflation is a while away. So utilities, which are undervalued can reap the rewards of low rates. And they are “safe” stocks on a relative basis. So if the market gets spanked (and it will sooner or later), utilities will see some of the flight to safety.
      My view on utilities is that of a 6 month or so play. Reflation stocks are a 1 year play. I own both. Although its been the reflation stocks that have had the fastest move lately due to the growing awareness of inflation potential–plus the oil trade (which you probably know I have been pounding the table on since October) is moving due to cold weather.

      Reply

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