Weekly Performance Review June 14th – 18th, 2021

This week on Wall Street, after three weeks of trading in range, stocks reversed course.  The Dow recorded its worst week since late october, down 3.45%.  The S&P 500 fell nearly 2% and the Nasdaq lost less than 1%.  The major catalyst was news that the Federal Reserve plans to back away from record-low interest rates sooner than projected.

“This notably more hawkish stance from the Fed has jolted investors as they assess the markets, and given that this shift comes on the back of record high stock market performance, it’s no surprise that equities have pulled back in response,” said Nicole Tanenbaum of Chequers Financial Management.

Read on  for more trading insight from our team and to find out how our stock picks fared for the week.  

06-14-2021_ABNB up 2.24%

Despite being a household name in the global travel industry, it’s captured less than 1% of its total addressable market.  That leaves a lot of room for growth in the long run. Investors who want to play on the expanding popularity of consumer travel may be interested in ABNB shares.

06-15-2021_SH up 2.08%

Inverse or “short” ETFs are another option that allow you to profit when a certain investment class declines in value.  Some investors use inverse ETFs to profit from market declines while others use them to hedge their portfolios against falling prices.  

Many of the Wall Street pros consider this tactic a more logical alternative to short-selling.  It’s an important tool to have in your tool kit for the next time you think a downturn could be coming.

With nearly $4 billion in assets, the ProShares Short S&P 500 (SH) is the largest inverse fund by value.  Commonly used by investors as a hedging vehicle, the fund strives to deliver the inverse performance of the S&P 500 (SPX).  If you’re concerned about the stock market falling, then this fund that moves the opposite direction of the largest 500 U.S. corporations is the simplest way to protect yourself. 

It’s important to note that SH is designed to deliver inverse results over a single trading session, with exposure resetting on a monthly basis.  Investors considering this ETF should understand how that nuance impacts the risk/return profile, and realize the potential for “return erosion” in volatile markets.  SH should definitely not be found in a long-term, buy-and-hold portfolio.  The fund comes along with an expense ratio of 0.9%

06-16-2021_CNQ down 9.3%

Based on the strengthening demand outlook, analysts expect oil prices to hit $80 a barrel or more this summer.  Simultaneously, several large operators are reducing supply or rebranding to focus on renewable energy.  ExxonMobil Corp. (XOM) lost a proxy fight to activist hedge fund

that will force it to reduce production.  Royal Dutch Shell (RDS.A) is considering selling off American oil fields.  This creates a huge opportunity for Canadian Natural Resources (CNQ). 

Headquartered in Calgary, Canada, CNQ has operations that are heavily focused in the Canadian oil sands, and its fields are set to last until the 2050’s and beyond.  The company has recently set its focus on becoming a net zero emitter, and since its projects are already in production, it should face less environmental opposition than yet-to-be-built oil projects. 

06-17-2021_GS down 6.1%

What makes Goldman Sachs (GS) stock so appealing is that it trades for just nine times earnings despite analysts expecting almost 17% EPS growth annually over the next five years.  That makes for a price-earnings growth ratio of just 0.55, reflecting extreme value.  GS is holding a forward P/E ratio of 8.6, a discount when compared to the industry average forward P/E of 12.29

Plus, while many large banks pay high dividends, Goldman pays a modest 1.4% and uses just 12% of earnings to do so, meaning it has ample room to grow its payout in the years to come.

06-18-2021_PAVE down 0.44%

A bipartisan infrastructure finally seems to be making progress.  Eleven Republican senators now support a bipartisan infrastructure framework, which would give the bill enough votes if all Democrats are on board.

The plan would revamp broadband, water, roads & bridges and include allocations for things like healthcare and clean energy.  While some cash is earmarked for certain sectors, it can be difficult to predict the individual companies that will benefit.  

The Global X U.S. Infrastructure Development ETF (PAVE) is the largest purely domestic infrastructure ETF with roughly $3.7 billion in assets under management.

There’s a wide array of individual stocks that make up the fund’s roughly 100 holdings.  Unlike most other infrastructure themed funds, PAVE focuses on domestic infrastructure.

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