Jeff Parent's Top Picks: February 28, 2024
Jeff Parent, chief investment officer at Castlemoore
FOCUS: Technical analysis
MARKET OUTLOOK:
There are a lot of worrisome technical indicators flashing now. The markets are looking very overbought after about a 25-per-cent rally from October. Volatility has really subsided, bond quality spreads are historically low, the put/call ratio is below average, and so on. I think there is still room for a continuing rally, driven by a broader base.
The relentless buying in the mega caps helps the indexes, but investors are ignoring the smaller and mid-cap companies. These companies should be benefiting from lowering interest rates and improving consumer demand as we get through the business cycle trough we seem to be in now. A pullback to the 4,950-5,000 level on the S&P 500 Index would make sense, especially if there is some profit taking in the large caps. This would be a healthy move. A break below 4,850 would indicate a potentially larger decline.
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TOP PICKS:
Jeff Parent, chief investment officer and portfolio manager at Castlemoore, discusses his top picks: Elastic, iShares US Small Cap Index ETF, and Guidewire Software.
Elastic (ESTC NYSE)
A company that is monetizing AI in a way that could be a standard at the enterprise level. The earning momentum is very good, and the continuation of the price momentum after the second quarter earnings in December makes this stock look good technically. Look to reduce or sell below 120. Earnings are out this Thursday.
iShares US Small Cap Index ETF (CAD-Hedged) (XSU TSX)
An index fund based on the Russell 2000, which gives a good exposure to what has been an ignored segment of the economy. It has the potential to do well when the market breadth broadens.
Guidewire Software (GWRE NYSE)
A midsized software company in the insurance business that has strong earnings and price momentum. Reduce below 110. Next earnings are expected on March 7.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| Elastic (ESTC NYSE) | Y | Y | Y |
| iShares US Small Cap Index ETF (CAD-Hedged) (XSU TSX) | Y | Y | Y |
| Guidewire Software (GWRE NYSE) | N | N | N |
PAST PICKS: AUGUST 24, 2023
Jeff Parent, chief investment officer and portfolio manager at Castlemoore, discusses his past picks: Direxion Daily 20+ Yr Treasury Bull 3X, Carnival, and Gibson Energy.
Direxion Daily 20+ Yr Treasury Bull 3X (TMF NYSEARCA)
- Then: US$6.05
- Now: US$52.43
- Return: -13%
- Total Return: -12%
Carnival (CCL NYSE)
- Then: US$15.71
- Now: US$16.01
- Return: 2%
- Total Return: 2%
Gibson Energy (GEI TSX)
- Then: $19.64
- Now: $22.08
- Return: 12%
- Total Return: 17%
Total Return Average: 2%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| TMF NYSEARCA | N | Y | N |
| CCL NYSE | Y | Y | Y |
| GEI TSX | Y | Y | Y |
