February 2022 Stock Picks
- Constantine’s investment recommendations (up 14.6%) from last February slightly exceeded the MSCI World Index ETF (14.2%) in US dollars, on average.
- Agricultural commodities have risen sharply while silver prices have not yet caught up to inflation.
- The Canadian stock market is predicted to outperform the US market due to having more in energy and financial and less technology stocks. Heightened geopolitical risk supports energy prices. Rising interest rates can be good for financials, but not good for technology stocks.
February 2021 Review
This time last year, our top picks were a couple of ETFs: agricultural commodities. The two ETFs that we mentioned a year ago were the DBA and RJA ETFs. The idea with that was all the quantitative easing and other monetary policy easing was pushing food prices and other prices higher. Therefore, adding agricultural commodities was a way to benefit from such activity. DBA was up 26.2% and RJA was up 35.4% since last year.
The Demand for Silver
Our next pick was silver, which has gone nowhere for a long time, price-wise. Again, the rationale was that, at some point, it should be catching up with inflation. Increased demand for silver for electric vehicles and other industrial uses should also help. Despite inflation coming in hotter than average, silver didn’t do so well. It was down about 14% for the SLV ETF and 17% for the PSLV ETF.
Newest Canadian Cryptocurrency ETFs
And we also mentioned that perhaps some investors, the ones that had higher risk tolerance, could use a very small portion of their portfolio and put it in cryptocurrencies. There was a launch of two new ETFs in Canada in early 2021: the QBTC.U ETF and the QETH.U ETF, which were up 9.1% and 47.9%, respectively.
The average of our picks was up 14.6%. In reality though, we would have a much larger position for agricultural commodities than silver and a lot less in cryptocurrencies. The MSCI World total Return ETF was up 14.2% in US dollars during the same time period.
February 2022 Recommendations
Our newest stock picks for this month include two Canadian and one US stock. They should do well for the next 12 months or more. Again, like I have been saying over the last 12 months or so, I believe that the Canadian market is likely to outperform the US market and that’s why the picks are mostly Canadian.
Great West Life
Number one Great West Life (TSX:GWO). It’s one of the three large insurance companies in Canada. The idea there is with rates rising, insurance companies can invest the new premiums in high-yielding instruments. And also, the stocks haven’t done as well over the last five years and perhaps it’s time for them to catch up. The company is reasonably priced and possibly about to do better than they used to. That’s a good combination for us to to make an investment in what could be a very good long term hold.
The next one is another Canadian stock. If you as an investor are okay with investing in traditional energy companies like oil and gas, Imperial Oil (TSX:IMO) is not a bad one. The large Canadian integrated oil company. Hedge against future inflation – we’ve had inflation over the last 12 months that was above average.
There is potential risk, at the moment, of geopolitical conflict with Russia perhaps invading Ukraine. Geopolitical risk tends to result in higher oil prices because oil is a global commodity. That could be bad for the rest of the market with the rates going higher to counteract the inflation and then tech stocks, utilities, REITs, real estate, and other assets going down as a result. One way to mitigate such risk is to participate in the potential of oil prices going even higher. One way to do it this is by owning stocks like Imperial Oil.
The next pick is a US company, Clearfield Inc., (NASDAQ:CLFD). This is an industrial hardware manufacturer in the fiber optic market, so technology hardware. It’s a smaller cap company – it’s under a billion dollars market cap and therefore riskier than the other two. But, it is likely benefiting from increased demand for their products through increased construction activity for new facilities. And while it’s not quite cheap, it’s still within the realm of okay valuation. The company’s doing well, the stock is doing well, and we think it has a little bit more room to grow for maybe another 12 months or longer.
If you have any questions about these stocks or any other stocks that you may own in your portfolio, please give us a call. Thank you.