As investors we need to seek out the beneficiaries of
a possible Trump presidency.
One choice would be to buy the companies that would
build a wall along the U.S.
Canadian boarder – to keep the Americans
out. I see that SNC-Lavalin Group Inc. (SNC) printed a new 52-week high and Aecon
Group Inc. (ARE) also had an up day on good volume.
In reality the wall strategy is a goofy idea because
neither country has the money to fund such a silly project. I guess SNC and ARE
were up for other reasons.
A few weeks ago I wrote this item for BMO Asset
Management Inc for posting on their BMO Canadian ETF Dashboard web site –
Begin ------------
Bill Carrigan, CIM, Technical Analyst,
GettingTechnical.com
Will that be guns or butter?
Summary of Recommendations:
BMO S&P/TSX Equal Weight Industrials Index ETF
(Ticker: ZIN)
Paul Anthony Samuelson was an American economist and
the first American to win the Nobel Memorial Prize in Economic Sciences. His
textbook Economics (ISBN- 0-07-0 092863-0) has become a classic in which he
states in a chapter entitled “Central Problems of Every Economic Society” that
a nation has to choose between two options when spending its finite resources.
It may buy either guns (invest in defense/military) or butter (invest in
production of goods), or a combination of both.
U.S. President Lyndon B. Johnson used the phrase to
catch the attention of the national media, while reporting on the state of
national defense and the economy. Another use of the phrase was British Prime
Minister, Margaret Thatcher's reference in a 1976 speech that, "The
Soviets put guns over butter, but we put almost everything over guns.”
When it relates to investing – there are three
strategies.
1. We can invest in the sector beneficiaries of guns
over butter, such as Materials, Energy, Technology and Industrials.
2. We can invest in the sector beneficiaries of
butter over guns, such as Financials, Consumer Discretionary, Consumer Staples,
Health Care or Industrials.
3. We can also invest in both because there is one
sector common to the guns and butter choices: Industrials. Investors can now
enjoy one investable product: the BMO S&P/TSX Equal Weight Industrials
Index ETF (ZIN), a diverse basket of cyclical companies that includes
Railroads, Aerospace, Infrastructure and Engineering Companies.
The BMO S&P/TSX Equal Weight Industrials Index
ETF (ZIN) has been designed to replicate, to the extent possible, the
performance of the S&P/TSX Equal Weight Industrials Index, net of expenses.
The Fund invests in and holds the Constituent Securities of the Index in the
same proportion as they are reflected in the Index. ZIN gives investors
exposure to companies engaged in Construction and Engineering, Aerospace and
Defense, Trading Companies, Railroads, Airlines, Trucking, Industrial
Machinery, and Marine Parts.
The chart below shows long-term plot of the
S&P/TSX Industrial Index, which is a reasonable replication of the
S&P/TSX Equal Weight Industrials Index. The long-term primary trend line
joins the significant lows of early 2009, mid-2011 and the recent 2016 lows –
all investment opportunities.
End -------
Now today I still agree with the Gums & Butter
issue but why not drill down into the sector and seek out the Aerospace and
Defense names – just in case Trump wins in November?
In the U.S. there are lots of aerospace
& defense related companies - Lockheed Martin Corp (LMT), United
Technologies Corp (UTX), Honeywell International (HON), Boeing Co/The (BA). General
Dynamics Corp (GD), Raytheon Co (RTN) and Northrop Grumman Corp (NOC). Many of
these names are at or close to new 52-week highs.
The related ETFs are the iShares U.S. Aerospace & Defense ETF
(ITA) and the PowerShares Aerospace & Defense Portfolio (PPA) :
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