Created in 2009, bitcoin uses encryption and a blockchain database that enables the fast and anonymous transfer of funds outside of a traditional centralized payment system.Dado Ruvic/Reuters
Merrill Lynch chief quantitative strategist Savita Subramanian advised investors to 'accept that we are in a momentum regime' in a Dec. 20 report. Citi's global strategy team also noted that in 13 of the past 17 years, momentum-based investing strategies have been among the most successful.
Each major investment strategy, from momentum to value to growth to GARP (growth at a reasonable price), tends to outperform at different stages of the market cycle. Momentum strategies – with a focus on stocks where prices and earnings are moving higher at the fastest pace – have historically performed best at the latest stages of a bull market.
Ms. Subramanian notes that value, neglect (stocks with the least analyst coverage and fund ownership), and dividends will be the worst performers if, in fact, we are in the eighth inning of the post-crisis market expansion.
All investment strategies have their strengths and weaknesses. Value investors, for instance, enjoy the downside protection of attractive valuation levels but often have to be extremely patient to generate strong returns.
Momentum investing involves the highest levels of volatility, for good and bad. Momentum investing strategies have offered the highest nominal returns, but are also characterized by the biggest market losses – double or more the percentage decline in the index – when the style goes out of favour.
Merrill Lynch recommends information technology and materials stocks as those with the highest degree of price and earnings growth momentum in the current market. And whether it works or not, it's likely to be a wild ride for investors.
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Great Canadian Gaming Corp. (GC-T) This security appeared on the positive breakouts list after the share price spiked 15 per cent on Tuesday on very high trading volume. B.C.-based Great Canadian Gaming operates 22 gaming properties with operations in British Columbia, Ontario, New Brunswick, Nova Scotia, and in Washington State. The company is anticipated to achieve solid earnings growth in the year ahead. On Dec. 19, the company announced that in partnership with Clairvest Group Inc., it was awarded the West Greater Toronto Area bundle, comprised of OLG Casino Brantford, OLG Slots at Mohawk Racetrack, OLG Slots at Flamboro Downs and OLG Slots at Grand River Raceway. These assets generated total gross gaming revenue of roughly $450-million in fiscal 2017. Jennifer Dowty reports.
Choice Properties Real Estate Investment Trust (CHP.UN-T) This stock appeared on the negative breakouts list, trading at the lower end of its historical trading range. The security offers investors a stable distribution equating to a 5.7 per cent yield. Toronto-based Choice Properties REIT owns, manages, and operates 546 properties across the country, anchored principally by Loblaw stores. As at Sept. 30, Loblaw accounted for roughly 88 per cent of annual base rent. Jennifer Dowty reports.
Transcontinental Inc. (TCL.A-T). Investors in Transcontinental Inc. have been rewarded for sticking with the company as it transitions more toward packaging and printing and away from print media – although some see now as a good time to take a bit of profit. Shares of the Montreal-based company are up nearly 20 per cent so far this year amid a steady sell-off of its newspaper assets and an ongoing string of acquisitions in what appears to be the more promising business of packaging for food and consumer products. Brenda Bouw reports.
The Rundown
What AGF portfolio manager Peter Imhof is buying and selling
Peter Imhof's household should be jolly this holiday season. After all, his young kids will probably be getting some of this year's hottest toys, including Hatchimal colleggtibles, while Mr. Imhof enjoys the gains for the fund he manages by owning stock in Spin Master, the company behind the hit brand. Mr. Imhof, vice-president and portfolio manager at AGF Investments, oversees about $780-million in assets under management across various funds, mainly the AGF Canadian Growth Equity Class fund, which falls into Morningstar's small-to-mid cap category. The Globe and Mail recently spoke with Mr. Imhof about what he's buying, selling and a high-flying stock he sold too soon. Brenda Bouw reports.
The fees, ETFs, and other things to know as RBC prepares launch of robo-adviser
Royal Bank of Canada will open its robo-adviser platform to all existing RBC clients in Ontario in the new year and will be offering no management fees for the first six months. Last month, The Globe and Mail reported RBC launched an automated online-portfolio platform for a select group of employees to pilot test under the RBC InvestEase brand. An RBC spokesperson confirmed a wider launch for all Ontario clients is set for the new year but declined to comment on further details. According to the RBC InvestEase website, the platform will offer RBC clients in Ontario the opportunity to open accounts with a $1,000 minimum balance. Subsequent contributions can be made in any amount. Clare O'Hara reports.
BMO slashes minimum account size of roboadviser platform
Bank of Montreal's roboadviser SmartFolio is looking to draw in more millennial investors by lowering its minimum account size to $1,000 from $5,000. "We heard from people who were new to investing that the $5,000 threshold was quite high for them to start off with," said Silvio Stroescu, head of digital investing for BMO. "We noticed that we don't have a lot of clients who are new to investing, and we want to shift down a path for those Canadians who haven't started to invest yet to begin to invest with Smartfolio." Clare O'Hara reports.
Ten years on, the TFSA's success could lead to its demise
Born of the ashes of the worst market meltdown since the Great Depression, the tax-free savings account enters its 10th year with an uncertain future. When the TFSA was launched in 2009, the value of equities had been slashed in half in less than three months. To help provide an incentive to invest in the capital markets, then-Finance Minister Jim Flaherty introduced a registered trading account where investment gains were free from taxation and withdrawals could be made at any time. "The TFSA is a long-term drain on government resources as opposed to an immediate one," says Myron Knodel, manager of tax and estate planning at Investors Group in Winnipeg. Mr. Knodel questions the sustainability of the TFSA as an all-out "tax free" investment account as the federal government searches for new sources of revenue. He doesn't rule out lower contribution limits – or even a freeze – in future years. Dale Jackson reports.
These are your best avenues for lowering the investment fees you pay
If you want to pay lower investment advice fees, the beginning of a new year is an ideal time to make your case. Many investment firms will be mailing clients an annual statement on returns and fees paid in dollar terms for investment advice and services. Advisers are expecting some clients to call to discuss the numbers. Rob Carrick outlines some suggestions on how to explore the idea of lower fees with your adviser.
Bitcoin and cryptocurrencies
Bitcoin tumbles more than 25% as sharks 'beginning to circle'
Bitcoin's plunge extended to almost 30 per cent Friday as the frenzy surrounding digital currencies faced one of its biggest tests yet. The world's largest cryptocurrency approached $10,000 as this week's selloff entered a fourth day with increasing momentum. It touched a record high of $19,511 on Monday. Other cryptocurrencies also tumbled: ethereum dropped as much as 36 per cent and litecoin slumped as much as 43 per cent, according to composite prices on Bloomberg. Samuel Potter and Eddie Van Der Walt report.
After 7,500% rally, cryptocurrency founder sells his coins
Charlie Lee, creator of the world's fifth-biggest cryptocurrency, cashed in during a 75-fold rally this year. The San Francisco-based software engineer whose litecoin was founded in 2011 "sold and donated" all of his holdings over the past few days, he said in a Reddit post. The disposal was aimed at preventing a "conflict of interest" when Lee makes comments on social media about the digital currency that could influence its price, he said. Bloomberg News reports.
A strategy for deciding when to sell bitcoin
Then there are the folks who own bitcoin. Not on our recommendation, mind you; rather, through their own speculative urges and a bit of good luck. I have had conversations with folks who are now sitting on a huge financial windfall. Yet the sheer speed of bitcoin appreciation and the scale of the windfall have them paralyzed, afraid to make a decision -- any decision -- that might be wrong. It isn't just that they don't know what to do; rather they have no idea about how to approach the issue of when to sell. Here is Barry Ritholtz's view.
Long Island Iced Tea adds blockchain to name, stock soars
There's a new leader in the sweepstakes for the zaniest name change in the crypto craze. Long Island Iced Tea Corp. shares rose 238 per cent after the company rebranded itself Long Blockchain Corp. It's the latest in a near-daily phenomenon sweeping the stock market, where obscure microcap companies reorient to focus on some aspect of the mania sparked by bitcoin's 1,600-per-cent rally this year. Long Blockchain, whose business has been selling non-alcoholic beverages, says it will now seek to partner with or invest in companies that develop the decentralized ledgers known as blockchain, the technology that underpins bitcoin. Bloomberg News reports.
Top Links
2018: 'the year of market euphoria'
'Electric cars' road to nowhere'
Others
The week's most oversold and overbought stocks on the TSX
Thursday's Insider Report: Companies insiders are buying and selling
Wednesday's Insider Report: Companies insiders are buying and selling
Number Crunchers
Nine Canadian stocks poised to benefit from the 'January effect'
Fifteen conservative U.S. stocks built to weather adverse markets
Nine stocks that combine earnings quality and social responsibility
Ask Globe Investor
Question: Everyone seems to be making money off of marijuana stocks. I never have owned any but I feel like I'm missing out on a good thing and easy money. Is it too late for me to buy?
Answer: Yes, many people these days are calling me and asking about buying a "weed" stock. I'll give you the same advice I give to all who ask me. This is an unknown sector when it comes to investing. Investing may not be the most appropriate word when it comes to buying a marijuana stock. We have no past history of how Canadians are going to react to it once it becomes legalized next July. Therefore there isn't any way we can predict the profitability of the companies in this sector. All companies are valued based on their current and estimated future profits. So when, how much and if a weed company is going to make a profit is anybody's guess.
With all that being said, if you want to gamble and buy a weed stock only spend what you are comfortable in losing. There is nothing to say that the buying interest in weed stocks is going to continue and, if so, for how much longer. This weed stock fever to me is reminiscent of the days of Nortel where the stock was skyrocketing and everyone wanted to jump on the band wagon and we know what eventually happened to it.
What also comes to mind for me: is the current price of a weed stock where it is because of the hype and interest in the sector, or is it because the company is actually worth that market capitalization?
Be very careful that the horse hasn't already left the barn and you are trying to bet on it. The race may already be near the finish.
--Nancy Woods, adviser with RBC
Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.
What's up in the days ahead
Watch for John Heinzl's ever popular Investor Quiz in Saturday's paper and Rob Carrick takes a look back at the investing craziness of 2017 and what advisers are suggesting for 2018.
Please note the Globe Investor newsletter will take a break on Dec. 26 but will return Dec. 29.
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Compiled by Gillian Livingston