WILL TRUMP RUIN MY PORTFOLIO & OTHER QUERIES.
IF TRUMP BECOMES PRESIDENT WHAT SHOULD I DO? THE FIVE MOST PRESSING QUESTIONS FOR INVESTORS
Since we started our independent research company in early 2012, we have answered more than 41,000 investment questions for clients. With this database, we have found that our individual investor focus gives us a good heads- up on what’s concerning investors these days. The trends in our questions can occasionally lead trends in the markets. At any rate, there are always some questions that keep popping up again and again, based on current market events. With that in mind, here are five investment questions that have come up on a regular basis recently.
1. If Clinton wins, what will happen to my biotech stocks?
This question is ver y popular, and has sparked massive fear with biotech investors, especially when a single recent tweet from Hillary caused billions of dollars of lost value in health care stocks when she went on the attack of high drug prices. We are less worried about this one. Every election, health care becomes a hot issue. It is obviously a hot topic with voters, and fat-cat drug companies are a very easy target for politicians. Health- care reform is hard, though, and takes years. Lobbyists on the other side are very powerful. We would not panic and sell biotech stocks. They remain a viable sector for investors. They are volatile, always have been, always will be. They just get a little bit more wild than usual in an election period. There is still money to be made on good health care stocks, such as Gilead (GILD on NASDAQ) with a net cash position and trading at nine times’ earnings.
2. What do I do with my Valeant shares?
This would be No. 1 on our question list recently. A few years ago we had Valeant in our Model Portfolio, and did well by it. We got nervous though on its very large debt level, and that worry remains today. With VRX, though, there is now a whole lot more to worry about. Undisclosed SEC investigations make the company look bad, personal attacks on the company by the aforementioned Hillary Clinton, large writedowns, short sellers’ attacks and delays in regulatory filings have all added up to crush the stock recently. Oh, and there’s still the $ 31 billion in debt. What to do? We would wait this one out. There are cheaper stocks in the sector, ones paying nice dividends and having no debt. Why put yourself through all of this stress owning VRX?
3. If Trump becomes president, what in the world should I do?
This question is getting l ots of traction with our client base. This week’s primaries will only to serve to heighten investor anxiety. It was interesting also this week that one of the leading Internet search trends recently was ‘ how do I move to Canada?’ as U. S citizens fret about what may or may not happen. The issue with Trump is uncertainty. You never know what he might say, or do, or whom he might offend. For markets, one of the worst things in uncertainty, and Trump as president would keep investors guessing, likely on a daily basis. While the market has a very good way of discounting politics in advance, and generally it is wiser to ignore most politics when investing, t his el ection will l i kely change that. We really have no idea how markets might react to a President Trump. But it is not likely to be a giant rally: We would keep some cash or gold on hand, just in case.
4. Can you recommend a multi- bagger?
A lot of our customers want suggestions for “multi-baggers,” or s t ocks t hat have the potential to rise two, three, four, five- fold or more. Alas, we can’t predict these in advance. We can make suggestions, though, such as Knight Therapeutics ( GUD on TSX), DHX Media ( DHX. B on TSX), Sylogist ( SYZ on TSX-V) or Prometic ( PLI on TSX). But multi- baggers need time to perform, and some of our customers want them fast. It just doesn’t work like this, though. What’s more, you often need to buy potential multi- baggers after t hey have already risen 100 per cent, or more. It is, usually, that the best companies today are the best companies of the future as well, only they become larger.
5. How much U. S. exposure should I have?
This question was big last year, and remains popular in 2016. It needs to be a personal decision for investors, but there are still plenty of high- quality i nvestment opportunities south of the border. What’s more, even though the Canadian dollar has staged a small recovery, economic and interest rate trends still favour the U. S. dollar. Generally, most investors would find a 20 per cent to 30 per cent U. S. position would be about right for today’s economic climes.
One thing we have learned from our question and answer service is that, even as our company has grown, the number of questions we get has not grown linearly. Most investors, we have discovered, like to worry about all of the same things. For contrarians, this can create some interesting opportunities. If everyone is worried about a stock, then by default that stock might be very cheap, as no one really expects anything from it. Sometimes, then, you might want to consider taking a worry, turning it around and turning it into a profitable trade.