Volume 14 Number 3
The first half of 2023 has now ended, and the market is still looking for a clear direction. With the exception of less than a dozen technology large caps, negative trends for North American stock markets have stabilized over the first six months of the year. The Canadian market is experiencing the most difficulty, with oil stocks and financials having declined substantially during this period. In this newsletter, we will review the last quarter by discussing our current positions and the private wealth trades we made. On a more administrative level, we will then present to you some positive changes to the Rivemont Funds. As usual, we will conclude with our market outlook and our largest positions.
While in the last newsletter we spoke to you about the prospects for copper and gold, it seems we were too hasty in our deductions, and the price of these assets did not break through their historical highs. We’re certainly going to revisit those sectors in the next few months or years, but at this point we’d rather wait for the uptrend to resume.
Currently, 80% of the portion of our assets allocated to equities is invested, and we’re waiting for a confirmation to deploy all of the funds. We are at a crossroads right now. Indeed, following the sharp decline in 2022, markets, especially in the U.S., have rebounded to about 10% below their December 2021 highs.
Invesco QQQ Trust (Nasdaq)
The Nasdaq is certainly the best performing index right now, but the components of that index are volatile, and the index lost over 40% of its value at some point in the last few years. That said, if we manage to break through the upper resistance level, we believe that the bull market will be confirmed and all our assets will be deployed. This should happen at the same time as a new high for Microsoft, which we are also watching very closely.
It’s hard to talk about finance now without talking about artificial intelligence and its impacts. The most important of these, in our view, would be the increase in demand for AI microprocessors. Consequently, we have added shares of ASML to the portfolios.
ASML is a Dutch company specializing in the manufacture of lithography equipment for the semiconductor industry. Founded in 1984, ASML has become a major player in the industry and is considered the world leader in the production of advanced lithography machines.
The company designs, develops and manufactures lithography systems used in the manufacture of electronic chips. ASML machines allow ultra-miniature patterns to be projected onto silicon wafers used in the production of semiconductors. These patterns are essential for the creation of complex integrated circuits, such as those used in computers, smartphones, tablets and other electronic devices.
ASML is known for its cutting-edge technology, including immersion lithography, which has revolutionized the semiconductor industry. This technology makes it possible to produce even smaller and more precise patterns by using water to improve resolution. ASML has also developed extreme ultraviolet (EUV) lithography systems, a major breakthrough in the field, enabling even higher resolutions.
The company has a close relationship with leading chip manufacturers around the world and plays a key role in advancing semiconductor technology. ASML machines are used by companies such as Intel, Samsung, TSMC and other major industry players.
ASML is headquartered in Veldhoven, the Netherlands, and has production and R&D facilities in several countries. It employs thousands of highly skilled people and invests heavily in research and development to stay at the forefront of technological innovation.
Note that the above text concerning ASML was entirely produced and reproduced without changes by ChatGPT from the California firm OpenAI, which we are obviously increasingly using in our research and operations. A glimpse of the growing impact artificial intelligence will have on our personal and professional lives.
With regard to bonds, over the past few weeks we substantially changed the composition of that portion of the portfolios. In my view, it’s important to take advantage of the rise in short-term interest rates compared to longer-term rates, the so-called “yield curve inversion.”
Normally, the yield curve rises, which means that long-term rates are higher than short-term. This is due to the fact that investors demand a higher yield premium to commit to long-term loans, which are generally considered more risky than short-term loans. However, contrary to what we usually see, the most attractive rates are currently in the range of 8 to 15 months. As a result, we sold a significant portion of our longer-term bonds and purchased products with a term of approximately one year. One of these is a National Bank structured note with a yield of 5.25% over one year, with interest payable every 6 months. When opportunities arise, you have to seize them!
Since the launch of Rivemont Funds, the firm Rivemont Investments has acted as portfolio manager, and Majestic Asset Management as investment fund manager (back office). On August 30, Rivemont will be appointed investment fund manager for these funds, and we will contract out these responsibilities to Majestic. This change, which is purely administrative and regulatory, has no impact on the unitholders, including in terms of fees, which remain the same.
At the same time, the Rivemont Alpha Fund will be renamed the Rivemont Long Short Fund to better reflect its strategy. There will be a consolidation of units at $10 each and a new Fundserv code will be used. Again, there will be no impact on the fees paid by the unitholders. We remain available, of course, should you have any questions regarding these changes.
You will find below a list of the individual securities with the largest weight in our “growth” portfolio. These stocks were selected based on their respective potential to outperform the stock market. You will find a short description of their activities, the annual dividend, if any, and the total return since their first inclusion in our portfolio.
After a somewhat disappointing first half of the year, we are now at a crossroads. If the uptrend breaks through the hoped-for levels, we will deploy all our capital. Conversely, we are ready to be defensive again if necessary.
We wish you a great summer and look forward to discussing finances with you soon!
Martin Lalonde, MBA, CFA
ps: As of publication date, portfolios are fully invested.
The information presented is dated June 30, 2023, unless otherwise specified and is for information purposes only. The information comes from sources that we deem reliable, but its accuracy is not guaranteed. This is not financial, legal or tax advice. Rivemont Investments is not responsible for errors or omissions with respect to this information or for any loss or damage suffered as a result of reading it.
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Volume 14 Number 4
That being said, the beauty, if not the benefit, of active management is that it is fortunately possible to remain underweight in certain asset classes. In addition, even when markets are stagnating, there are still opportunities in specific sectors.Read more >
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