Likes/Dislikes - June 14, 2019

Below are Evergreen Gavekal's Likes/Dislikes for June 14, 2019.


OUR CURRENT LIKES AND DISLIKES

Changes highlighted in bold.

LIKE

  • Large-cap growth (focus on lower P/E issues within this style; i.e., “growth at a reasonable price”)
  • Some international developed markets (especially Japan)
  • Publicly-traded pipeline partnerships (MLPs and other mid-stream energy securities) yielding 7%-15% (resume accumulation after the recent mini-correction)
  • Gold-mining stocks (buy less aggressively due to the recent rally)
  • Gold (same as with the miners)
  • Select blue chip oil stocks
  • One- to two-year Treasury notes
  • Canadian dollar-denominated short-term bonds
  • Short-term investment grade corporate bonds (1-2 year maturities)
  • Emerging market bonds in local currency (start a dollar-cost-averaging process)
  • Large-cap value (there are still bargains in this style, but not nearly as many as there were in late 2018)
  • Intermediate municipal bonds with strong credit ratings
  • Intermediate-term Treasury bonds (buying longer maturities less aggressively due to the recent big bond rally; however, we continue to see decent value in very high grade 3- to 7-year US bonds)
  • Long-term municipal bonds (again, buy less aggressively due to the recent rally)
  • Long-term Treasury bonds (same as with muni bonds)
  • Silver (even more so than gold)
  • Japanese Yen (buy cautiously after a big rally)
  • Copper producers

NEUTRAL

  • Most cyclical resource-based stocks
  • Mid-cap growth
  • Emerging stock markets; however, a number of Asian developing markets appear undervalued
  • Canadian REITs
  • Intermediate-term investment-grade corporate bonds, yielding approximately 4%
  • US-based Real Estate Investment Trusts (REITs)
  • Long-term investment grade corporate bonds
  • Short euro ETF
  • Small-cap growth
  • Preferred stocks
  • Mexican stocks (after a healthy rally, we have sold all of our REIT holdings)
  • Cash
  • Solar Yield Cos (PG&E risk is rising again; taking profits in one of the more Calif-exposed companies)

DISLIKE

  • Small-cap value
  • Mid-cap value
  • Lower-rated junk bonds
  • Floating-rate bank debt (junk)
  • US industrial machinery stocks (such as one that runs like a certain forest animal, and another famous for its yellow-colored equipment)
  • BB-rated corporate bonds (credit spreads widened significantly during the 4th quarter of 2018 but have declined sharply this year; we expect renewed widening in the months ahead) * **
  • Dim sum bond ETF; individual issues, such as blue-chip multi-nationals, are attractive if your broker/custodian is able to buy them
  • European banks
  • Investment-grade floating rate corporate bonds (reducing exposure to these as Fed rate cuts are increasingly likely)

* Credit spreads are the difference between non-government bond interest rates and treasury yields.
** Some BB-rated issues are currently attractive despite our spread-widening fears.

DISCLOSURE: This material has been prepared or is distributed solely for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Any opinions, recommendations, and assumptions included in this presentation are based upon current market conditions, reflect our judgment as of the date of this presentation, and are subject to change. Past performance is no guarantee of future results. All investments involve risk including the loss of principal. All material presented is compiled from sources believed to be reliable, but accuracy cannot be guaranteed and Evergreen makes no representation as to its accuracy or completeness. Securities highlighted or discussed in this communication are mentioned for illustrative purposes only and are not a recommendation for these securities. Evergreen actively manages client portfolios and securities discussed in this communication may or may not be held in such portfolios at any given time.

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