Our portfolios finished lower in March*, as two Silicon Valley banks found themselves on the wrong side of an old-fashioned bank run, while a beleaguered Swiss bank finally closed after decades of missteps. Stocks reacted negatively to the news, but firmed up towards the end of the month. In our view the turmoil caused in Silicon Valley and Switzerland is likely to be short-lived and not systemic. Regulators acted quickly to remedy concerns at the banks involved, along with providing additional liquidity to the U.S. and global financial systems to ease financial conditions.
Our base case continues to expect a rally in stocks for the remainder of the year, with the anticipation of a higher-than-average annual return for 2023, and new highs ahead for popular stock market indices. Using our proprietary measures, nearly all of the signals we’ve seen trigger before historic bull market rallies have triggered within the past four months, supporting this optimistic view.
Economic growth is positive, inflation continues to moderate, employment is strong, and consumer spending is surprising nearly everyone to the upside (even counting for inflation). From here we expect even stronger corporate and consumer spending with energy prices falling considerably in March, plus easing financial conditions from the new central bank liquidity. We noted a couple of months ago that we could see a rare “deflationary boom” scenario unfolding as consumers react to lower prices with more spending, and that view is just starting to gain momentum now.
The market trend is up, and we continue to find compelling investment opportunities for income and growth.
*Subsequent to writing, the Growth Portfolio finished higher for the month.
Model Portfolio Highlights
Over the last few months we’ve been increasing positions in the tech sector. This month e-commerce giant Shopify earned a place in our portfolio after staging a strong uptrend from October 2022 lows. We bought the stock about 71% below its 2021 highs. The company’s growth remains strong.
American Growth Portfolio
We added four new positions to the portfolio after taking profits on Elevance Health, Booz Allen Hamilton, and closing Brown-Forman at a minor loss. Each of our new companies continues to generate strong growth, and was purchased at substantially lower prices from their 2021 highs. We added Invisalign-maker Align Technologies, gaming company Roblox, online radio hub Spotify, and payment processor Block Inc.
In March we added allocations to Canadian real estate and Canadian high-dividend stocks to take advantage of higher dividend yields on this side of the border.
Small Cap Portfolio
Continuing our technology theme, we picked up shares of Dye & Durham, a global software provider for legal and financial businesses. We purchased shares at a 62% discount from their 2020 peak.
Across all portfolios we look for mispriced opportunities, considering only those with a significant margin of safety and minimal risk of permanent capital loss. After identifying such opportunities, patience is the most important factor in realizing our expected long term return.
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Ben W. Kizemchuk
Portfolio Manager & Investment Advisor
Wellington-Altus Private Wealth
Ben Kizemchuk offers full-service wealth management for high-net-worth Canadians including families, business owners, and successful professionals. Ben and his team provide investment advice, financial planning, tax minimization strategies, and retirement planning.