Richard Croft, president, chief investment officer and portfolio manager at Croft Financial Group in Toronto. Illustration by Joel KimmelThe Globe and Mail
Money manager Richard Croft believes investors are in the midst of a “serious bull market” despite recent market volatility.
He points to artificial intelligence spending and tax reductions in the U.S. as the “oomph” that could send the S&P 500 as high as 8,000 before year’s end (the index closed just above 7,337 on Thursday).
“My advice: keep your portfolio diversified, but hang on to the bucking bull and enjoy the ride,” says Mr. Croft, president, chief investment officer and portfolio manager at Croft Financial Group in Toronto, who oversees about $1.5-billion in assets.
He’s bullish on sectors such as technology and financials, and has cut back on gold after the recent run-up.
Mr. Croft runs two separate investment pools for clients: one growth-oriented, which he describes as the “conviction” pool and one more balanced, described as the “enhanced income” pool. He says the pool structure is more tax-efficient for his active strategy that includes some options trading.
The “conviction” pool – which is heavy on technology stocks, including the Magnificent Seven, Canadian bank stocks and gold (before he trimmed it) – is up 47 per cent over the past year as of April 30. Its three- and five-year annualized returns were 29.6 per cent and 10.4 per cent, respectively.
The “enhanced income” pool, which includes dividend stocks such as banks and pipelines, is up 37.9 per cent over the past year as of April 30. Its three- and five-year annualized returns were 16 per cent and 7.1 per cent, respectively. The performance data are based on total returns, net of fees.
The Globe spoke with Mr. Croft recently about what he’s been buying and selling:
Name three top picks in your portfolio right now.
Amazon.com Inc. AMZN-Q is a stock I’ve held on and off for years. I bought more of it in early April, at an average cost of about US$242 a share. It accounts for about 10.5 per cent of the portfolio today.
Amazon is a multi-pronged business, with e-commerce and its AWS cloud business, the latter of which is a major profit driver. The margins are significantly higher than in the retail business.
Amazon’s investment in the AI company Anthropic will also benefit the company. The retail business will continue to expand at a much faster pace than many retail operators. It’s a company with an enormous amount of levers it can pull, making it a unique structure that I think is undervalued compared to its Magnificent Seven peers.
Circle Internet Group Inc. CRCL-N, a network for stablecoins, is a stock I bought in February for about US$80 a share. [Stablecoins are cryptocurrencies designed to maintain a stable value by holding reserve assets and are considered less volatile than other cryptocurrencies, such as Bitcoin.]
One advantage of digital currencies is the ability to transact instantly at zero cost. The other reason for buying this particular company is that it won the contract [with Polymarket] to be the sole provider of currency for bets on the prediction market.
I don’t agree with those markets. I don’t use them, but that’s neither here nor there. I think those markets are set to explode exponentially over the next 10 years. That tailwind is the story for this company today.
The other story is the importance of stablecoin. We don’t have a huge position, about 2 per cent, but I think it’s interesting.
Advanced Micro Devices Inc. AMD-Q, the chip maker, is a stock I’ve held on and off for the past 18 months. I bought it most recently in late April, at around US$346 a share. It represents about 5.6 per cent of the portfolio.
The chip business is where it’s at today; it’s one of the key components that enable artificial intelligence. AMD plays second fiddle to Nvidia Corp. NVDA-Q, but with Nvidia, you’re dealing with the impact the law of large numbers (its market cap is more than US$4-trillion) can have on its future growth trajectory.
I have more concern about that than I do about a company such as AMD, which is big in its own right but not on the same scale. That’s the way I would rather play the growth in AI spending.
Name a stock you sold recently.
I recently reduced my gold position. I trimmed my holdings in Agnico Eagle Mines Ltd. AEM-T throughout April and sold my entire position in SPDR Gold Shares ETF GLD-A in late April.
It’s not that I dislike gold entirely, but after the latest rally, I thought it was time to take some profits. With rising oil prices, the focus is back on the U.S. dollar as a safe-haven investment.
That said, my decision to lighten up on gold had more to do with a shift in demand. Central banks are not buying gold reserves to the extent that they were when I started buying alternatives (gold, silver and precious metal companies).
In my mind, the bullish story was that central banks and retail investors were buying at the same time. That was unusual, as central banks typically sell from their reserves to meet retail demand. If you assume that the central banks’ buying frenzy is waning, then gold will likely tread water.
This interview has been edited and condensed.