ABC Funds portfolio manager Irwin Michael says he sees more value in the pessimistic U.S. market than he does in Canada right now. And he reiterates the planned move to an even split between Canadian and U.S. names in its flagship portfolios.
“While North American equity markets are considerably improved over the past four weeks, particular sectors such as oil and gas, mining, steels, etc. have come under significant selling pressure,” he notes in his latest monthly market commentary.
“Continuing investor concern over interest rates, weak U.S. dollar, U.S. twin deficits, a potentially weaker American economic outlook and the recent Canadian show-down on a federal government non-confidence vote have plagued the North American equity markets.”
Michael points out that other typical market reactions have been stood on their head. “Gold, a traditional investment winner during investment turmoil, has weakened significantly,” he notes, yet, “oil has stayed remarkably firm over $50 a barrel, in spite of surging inventories, and the [U.S. dollar] regardless of the continuous fears of a precipitous fall, has not only held firm but has risen to $1.25 to the Eurodollar.” He suggests that the French rejection of the European constitution could provide further strength to the U.S. Currency too.
“Overall we remain quite selective as to equity purchases, however, we are prepared to make considerable additional equity commitments whenever opportunities are uncovered,” he says. “Not surprising is the fact that most of these opportunities appear to be occurring in the U.S. due to the general negativity permeating the American equity market.”
“Patience and judicious stock picking, will be key,” he counsels.
Also, Michael expects the final passage of the Canadian budget will provide an “interesting investment slant”.
“With the elimination of the 30% foreign content restriction on pensions and RRSP portfolios, only time will tell whether Canadian investors will reduce and sell Canadian equities to buy foreign securities. This event could provide for excellent buying opportunities,” he adds.
“Given that we are uncovering three or four U.S. stocks to each undervalued Canadian share, we intend to shift our country mix to 50-50 Canada/U.S. in our ABC Fully-Managed and ABC Fundamental-Value portfolios. While this action might appear to provide additional currency risk, we believe that long-term investment performance will be enhanced with this new country mix decision,” he concludes.
Michael predicts success for U.S. market
Patience and judicious stock picking will be key, ABC manager says
- By: James Langton
- May 30, 2005 May 30, 2005
- 16:56