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December was another strong month for stocks, propelling U.S. indices and many companies to new all-time highs, as we expected. The “breadth thrusts” we noted last month amplified into extreme buying pressure, with over 90% of S&P 500 stocks closing above their 50-day average price by mid-December. Historically, such intense buying pressure is seen at the dawn of new bull markets, suggesting strong momentum ahead.
From here, various statistical data we track strongly suggest that strength begets strength, and so we anticipate continuing gains through 2024. For example, since 1945, when the S&P 500 closed at a new all-time high after at least one year without one, the average 12-month forward return was 14.8%, positive in 14 of 15 cases.
Looking ahead, we see continued economic strength, particularly in the United States, driving corporate earnings higher. With interest rates remaining below restrictive levels, substantial election-year government spending on the horizon, and robust employment figures, the upward trajectory of economic momentum continues to build. Should central banks opt for cut rates in 2024, as some predict, our data suggest the potential for even stronger market performance. The future belongs to optimists.
Model Portfolio Highlights
Growth Portfolio
In December, we exited Lightspeed due to its increasing volatility, resulting in a negligible loss. We reposition the proceeds into two companies: Boyd Group, an auto-repair company, and FirstService, a residential property manager. Both companies have long track records of consistently strong free cash flow growth. Currently, Boyd is making new all-time highs, while FirstService is making new annual highs.
American Growth Portfolio
In December, we secured a large profit on Spotify, a modest gain on Starbucks, and incurred a loss on Align, which breached our loss threshold. We reinvested the proceeds into ServiceNow, which helps companies digitize their operations, and Intuit, better known as the holding company for TurboTax, Mint, Quicken, Mailchimp and other apps. Our new positions have increased the total free cash flow growth of the portfolio, which we expect will improve our long-term return potential.
Income Portfolio
We made no changes to the holdings in December.
Small Cap Portfolio
In December, we sold Vecima at a loss after it crossed our loss threshold. We replaced it with Sangoma Technologies, which manages cloud-based communications for businesses. Despite the substantial decline in its share price from its 2021 highs, Sangoma has consistently shown an upward trend in cash flow growth. We believe this is an opportunity to acquire shares at an undervalued price point.
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.
If you have any questions about your portfolio, financial planning or investments please be in touch. If you’d like to add a friend or family to this email list, please let me know. Click to book a meeting: https://calendly.com/bwk-wapw
Thank you.
Yours,
Ben
Ben W. Kizemchuk
Portfolio Manager & Investment Advisor
Wellington-Altus Private Wealth
Office: 416.369.3024
Email: bwk@wellington-altus.ca
Book a meeting
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.
Performance reporting disclaimer: Performance results reflect the returns of each representative model portfolio. Returns are calculated using each model portfolio’s monthly performance, including changes in securities values, and accrued income (i.e., dividend and interest), against its market value at the closing of the last business day of the previous month. Performance results are expressed in the stated strategy’s base currency and are calculated on a net of fees basis. Individual account performance may materially differ from the representative performance history set out in this document, due to factors such as an account’s size, the length of time the strategy has been held, the timing and amount of deposits and withdrawals, the timing and amount of dividends and other income, and fees and other costs. Investors should seek professional financial advice regarding the appropriateness of investing in any investment strategy or security and no financial decisions should be made solely on the basis of the information provided in this document. This is not an official statement from WAPW. Please refer to your official WAPW statement for your specific performance numbers.
Market Commentary
January 2024 Update
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December was another strong month for stocks, propelling U.S. indices and many companies to new all-time highs, as we expected. The “breadth thrusts” we noted last month amplified into extreme buying pressure, with over 90% of S&P 500 stocks closing above their 50-day average price by mid-December. Historically, such intense buying pressure is seen at the dawn of new bull markets, suggesting strong momentum ahead.
From here, various statistical data we track strongly suggest that strength begets strength, and so we anticipate continuing gains through 2024. For example, since 1945, when the S&P 500 closed at a new all-time high after at least one year without one, the average 12-month forward return was 14.8%, positive in 14 of 15 cases.
Looking ahead, we see continued economic strength, particularly in the United States, driving corporate earnings higher. With interest rates remaining below restrictive levels, substantial election-year government spending on the horizon, and robust employment figures, the upward trajectory of economic momentum continues to build. Should central banks opt for cut rates in 2024, as some predict, our data suggest the potential for even stronger market performance. The future belongs to optimists.
Model Portfolio Highlights
Growth Portfolio
In December, we exited Lightspeed due to its increasing volatility, resulting in a negligible loss. We reposition the proceeds into two companies: Boyd Group, an auto-repair company, and FirstService, a residential property manager. Both companies have long track records of consistently strong free cash flow growth. Currently, Boyd is making new all-time highs, while FirstService is making new annual highs.
American Growth Portfolio
In December, we secured a large profit on Spotify, a modest gain on Starbucks, and incurred a loss on Align, which breached our loss threshold. We reinvested the proceeds into ServiceNow, which helps companies digitize their operations, and Intuit, better known as the holding company for TurboTax, Mint, Quicken, Mailchimp and other apps. Our new positions have increased the total free cash flow growth of the portfolio, which we expect will improve our long-term return potential.
Income Portfolio
We made no changes to the holdings in December.
Small Cap Portfolio
In December, we sold Vecima at a loss after it crossed our loss threshold. We replaced it with Sangoma Technologies, which manages cloud-based communications for businesses. Despite the substantial decline in its share price from its 2021 highs, Sangoma has consistently shown an upward trend in cash flow growth. We believe this is an opportunity to acquire shares at an undervalued price point.
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.
If you have any questions about your portfolio, financial planning or investments please be in touch. If you’d like to add a friend or family to this email list, please let me know. Click to book a meeting: https://calendly.com/bwk-wapw
Thank you.
Yours,
Ben
Ben W. Kizemchuk
Portfolio Manager & Investment Advisor
Wellington-Altus Private Wealth
Office: 416.369.3024
Email: bwk@wellington-altus.ca
Book a meeting
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.
Performance reporting disclaimer: Performance results reflect the returns of each representative model portfolio. Returns are calculated using each model portfolio’s monthly performance, including changes in securities values, and accrued income (i.e., dividend and interest), against its market value at the closing of the last business day of the previous month. Performance results are expressed in the stated strategy’s base currency and are calculated on a net of fees basis. Individual account performance may materially differ from the representative performance history set out in this document, due to factors such as an account’s size, the length of time the strategy has been held, the timing and amount of deposits and withdrawals, the timing and amount of dividends and other income, and fees and other costs. Investors should seek professional financial advice regarding the appropriateness of investing in any investment strategy or security and no financial decisions should be made solely on the basis of the information provided in this document. This is not an official statement from WAPW. Please refer to your official WAPW statement for your specific performance numbers.
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The opinions contained herein are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Wellington-Altus Private Wealth. Assumptions, opinions and information constitute the author’s judgement as of the date this material and subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. All third party products and services referred to or advertised in this presentation are sold by the company or organization named. While these products or services may serve as valuable aids to the independent investor, WAPW does not specifically endorse any of these products or services. The third party products and services referred to, or advertised in this presentation, are available as a convenience to its customers only, and WAPW is not liable for any claims, losses or damages however arising out of any purchase or use of third party products or services. All insurance products and services are offered by life licensed advisors of Wellington-Altus. Wellington-Altus Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. All trademarks are the property of their respective owners.