From growth to value?
The Covid-19 crisis, which pushed the US economy into recession, could give rise to a new market cycle, said Astonia Portfolio Advisors founder and chief investment officer John Davy this week to CNBC “ETF Edge.”
Looking at WizardTree USA SmallCap (EES) payroll, Davy noted that his price-earnings ratio of 9 was noticeably lower than in the iShares Russell 2000 ETF (IWM), in which the PE ratio is about 14.
“This … looks very attractive to me if you think that the economy is experiencing a cyclical recovery and that we have experienced a recession,” said Davy, adding that his company manages “some long-gone pension money when our time horizon is is 5-10 years. “
“If I look at macroeconomic data, revenues, everything looks as if they are worried. So, the Fed has fixed interest rates at zero and [providing] The floor of financial assets – they go out and buy individual bonds and ETFs – I just think that now is the time to strategically balance your portfolio, ”he said.
Not-beloved groups, including small capitals, emerging market stocks and banking games, topped Davy’s rebalancing list.
“The idea is to buy low, sell high and buy when valuations are low,” he said.
The two emerging market ETFs now look attractive to Davi based on their ratings: the WisdomTree Emerging Markets Quality Dividend Growth Fund (DGRE) and iShares MSCI China ETFs (MCHI).
He said the Invesco KBW Bank ETF (KBWB), which tracks US bank stocks, is also a good long-term bet.
“For me, it looks like an adjustable structure. You have a very strong balance. I think banks are in a good position. Therefore, as the yield curve is getting stronger and rates are rising, I think banks should be quite interesting “5-10 years of trading,” he said.
Highly-capitalized U.S.-based stocks that, according to Davy, looked expensive depending on their PE ratios, were just one of the groups he avoided.
“The whole American market, I would say, looks interesting as soon as you remove” such popular deals as the SPDR S & P 500 ETF Trust (SPY), Invesco S & P 500 Low Volatility (SPLV), iShares Edge MSCI Min Vol USA ETFs (USMVs)) and defensive games such as basic consumer goods and energy sector ETFs.
“This is how you build your portfolio,” he said, adding that his company was “lucky” with past calls.
“We said that we are leaning towards quality, leaning towards quality growth, so now we see that the time has come to make a profit,” he said.