Scotiabank director and portfolio manager Stan Wong describes himself as an active, contrarian investor, which is evident in some of his recent trading activity – Mr. Wong has been buying Facebook on the recent dip and selling oil stocks even as the price of the commodity moves higher.
Stan Wong describes himself as an active, contrarian investor, which is evident in some of his recent trading activity. The director and portfolio manager at Scotia Wealth Management has been buying Facebook on the recent dip and selling oil stocks even as the price of the commodity moves higher.
His portfolio is heavily weighted to equities, including 47 per cent in the United States, 23 per cent in Canada and the remainder international, with 10 per cent cash. “I see a runway of at least 18-to-24 months where stocks outperform bonds,” says Mr. Wong, who manages about $230-million in assets for family and business clients. “My investment philosophy is driven by the belief that an active or tactical investment strategy will outperform a passive or ‘buy and hold’ strategy.”
Three of Mr. Wong’s past equity picks from a year ago – Citigroup, Visa and SPDR Euro Stoxx ETF – have returned an average of 25 per cent over the past year. The Globe recently spoke to Mr. Wong about what he has been buying and selling and the one stock he probably should have bought, whose service his family uses almost daily.
What does your portfolio look like right now?
My top sector weightings are 38 per cent financials, 18 per cent technology, 17 per cent consumer discretionary and 14 per cent health care. I favour high-quality stocks and expect dividend growers to outperform dividend payers given the rising interest rate environment. While growth stocks have largely outperformed value stocks since 2007, I expect value stocks to eventually outpace growth stocks as interest rates drift higher.
What concerns are you hearing from clients?
They are largely concerned with three things: geopolitical issues as it relates to global trade tensions, persistent controversies in the White House and the longevity of the current bull market. The easing of the trade tensions, I think, has helped the markets move up in the last little while. U.S. President Donald Trump’s dealings in the White House certainly present a wildcard scenario, but I believe much of it to be noise rather than something that can truly affect the economy or the equity markets beyond a short-term disturbance.
What stocks have you been buying lately?
I take a more active approach, which leads to more opportunistic buys, some of which might be a little bit more contrarian. One is Facebook. I’ve held it for a while (first bought in August 2015 at US$85) and bought on the most recent dip. I bought more in March around US$163. To me, Facebook’s recent data breach and privacy issues had caused its share price to fall to attractive levels for intermediate and long-term growth investors. There are likely limited changes to the company’s model of monetizing user information for ad targeting and as a result, investors should not expect significant long-term negative effects to Facebook’s platform, operations and sales growth.
Another is AbbVie Inc., a spinoff from Abbott Laboratories in early 2013. It’s a pharmaceutical drug company with exposure to immunology and oncology medicines. Its largest revenue source comes from Humira, a drug to treat rheumatoid arthritis, psoriasis and Crohn’s disease. I like the name in part because it’s shareholder-friendly in terms of what management is doing. In February, management announced a US$10-billion share buyback program and boosted its dividend by 35 per cent. It has a nice dividend yield of about 4.1 per cent. I initially purchased it in June 2016 at about US$61 and took profits in February 2018 at about US$116. I bought it again recently around US$92. I also like that it’s in the next-generation immunology and oncology drugs. They have a good pipeline. Health care is a good space to be and this is one of my favourite health care names right now.
What stocks have you been selling?
The energy sector has been rallying latterly and I’ve taken profits by selling Canadian Natural Resources and Phillips 66, a refining company in the U.S. I bought Canadian Natural Resources in July 2017 at around $37 and sold it earlier this month at around $43.50. Phillips 66 I bought in February 2018 around US$92 and sold it earlier this month around US$103, for a quick profit. Oil prices have risen to their highest levels since 2014, partly on fears that the conflict in the Middle East would broaden out. But, in our experience, once those tensions ease – which we are already seeing from the Syria situation – we’ll see oil prices back down and stock revert to previous prices. Beyond the short-term, I’m pretty skeptical that we will see a sustained upward move in oil prices given that we have elevated U.S. crude oil production and strong technological advances. I look at energy as more of a trading opportunity, not necessarily as a long-term or even medium-term buy.
What’s the one stock you wish you bought?
Netflix Inc., which recently hit all-time highs. One of my concerns was valuation. It’s now trading at more than 100 times forward earnings. They’ve executed well. Their growth has been strong. But I always look at valuation and it’s one of the things that will keep me from buying a stock, no matter how strong the growth rate is. I’ve also been worried about competition from Amazon and Disney. That’s what has kept me away from the name, but the stock price has proven me wrong. I’m a Netflix user myself, but I still feel the valuation is high and the risks are still there.
This interview has been edited and condensed.