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What this HollisWealth fund manager, fearing a market correction, is buying and selling

Jason Del Vicario, a porfolio manager and investment adviser at HollisWealth, says the central banks of the world are making a mistake by raising rates.

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Jason Del Vicario has been trimming positions in some of his best-performing stocks and shoring up cash, preparing for a potential market correction. Mr. Del Vicario, who oversees about $115-million in assets as a portfolio manager and investment adviser at HollisWealth, a division of Industrial Alliance Securities Inc., believes the market "is topping out." Over the past year, his firm's moderate-growth fund has returned about 9 per cent, compared to about 1 per cent for the S&P TSX composite index. The Globe recently spoke with Mr. Del Vicario about his take on the markets and regrets over not buying certain high-flying stocks a lot sooner.

What concerns are you hearing from investors today?Most people are worried about the headlines. Things like what happened recently in Barcelona [Spain], Charlottesville [Va.] and what's happening in North Korea.

It's challenging though, because in the grand scheme of things, Nike is still selling shoes, Disney is still making movies and Gillette is still selling razor blades. It's hard for investors to separate scary headlines from stuff that will have a real impact on their portfolios. Investors are worried about the valuation of markets, too. I'm worried about the valuation of the market. In my opinion, we're in an environment that's fake. Central banks have engineered a rise in risk assets because of the ultralow interest rates and all of the money printed. Where would we be if rates were 4 [per cent] or 5 per cent?

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What's your take on the markets today?I think the central banks of the world are making a major policy mistake by raising rates. Economic activity has been crimped by all of the debt that has been built up. In the next six-to-12 months, assuming that central banks continue to raise rates, I think there is a very real possibility that we'll see a significant market correction. In the next one-to-three years, we're likely going to have a recession. I think everyone can agree that we're probably closer to the next recession than we are removed from the last one.

How are you positioning your portfolio?We recently dialled back our risk. We were 30-per-cent fixed income and 70-per-cent stocks. We are about 10-per-cent cash now, 55-per-cent stocks and 35-per-cent fixed income. It looks like the market is topping out a little bit, to me. We just came through a really successful second-quarter earnings season. U.S. markets should have hit new highs and they haven't. To me, that's a sign to take a little bit of cover.

What have you been buying lately?Our most recent purchase would have been Open Text and New Flyer. Strong companies tend to stay strong and get better, while poor companies get poorer.

I have had my eye on them for a while. We bought Open Text on a dip after a weak earnings report. We bought New Flyer as they were making new highs. We bought both in the low $40-range.

What have you been selling?We recently trimmed Facebook, Constellation Software, Dollarama and Alimentation Couche Tard. They were all 5-per-cent weights. We've cut them to 4 per cent. I like that we're not selling in an environment where there's panic. I like not selling with the herd.

What stock(s) do you wish you bought?I first screened Constellation Software at $30. We didn't really understand what it did. Then I watched it get to $250, which is where we bought it. Now, it's at $700. I wish I would've bought it sooner. Same thing with New Flyer when it first came across my screen at $18. One I don't own and wish I bought was Kinaxis. It first came across my screen at $30 and then it rocketed up to $90. It has come off a bit, so I am taking a hard look at it now.

This interview has been edited and condensed.

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About the Author
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Brenda Bouw is a freelance writer and editor based in Vancouver. She has more than 20 years of experience as a business reporter, including at The Globe and Mail, The Canadian Press, the Financial Post and was executive producer at BNN (formerly ROBTv). Brenda was also part of the Globe and Mail reporting team that won the 2010 National Newspaper Award for business journalism. More

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