Franklin Bissett overweights defensive stocks over traditional Canadian sectors like Energy & Financials


Despite a looming recession acknowledged by most of the financial industry, Franklin Templeton Canada is relatively upbeat about the prospects for both Canadian stocks and fixed income over the short- to medium-term. In a Toronto event on Wednesday aimed at financial advisors and the press, Garey J. Aitken, MBA, CFA — Calgary-based Chief Investment Officer for Franklin Bissett Investment Management — described how he has been positioning his Franklin Bissett Canadian Equity Fund somewhat defensively. (There was also a webinar version of the event.)

As you can see from the above breakdown of the fund, Aitken is way overweight defensive sectors like Consumer Staples relative to the index: the S&P/TSX composite. In Canada, consumer staples amounts to the major grocery stores like Loblaw and Metro: there’s little along the lines of such American staples giants as Proctor & Gamble or Colgate Palmolive. Aitken said his fund has owned Saputo Inc. since its IPO in the late 90s, and has long owned Alimentation Couche-Tard Inc.

The fund has been overweight consumer staples for more than a year: as the chart shows, he was overweight this defensive sector by a whopping 730 basis points a year ago and this year is even more overweight by 770 bps. He is also overweight the other big defensive sector, Utilities, by 210 bps, compared to overweight by 110 bps a year ago. The third major defensive sector globally is Health Care, but the Canadian stock market has only minimal exposure to that sector.

Aitken has moved from a small underweight position in industrials a year ago to a modest overweight in 2023 of 170 bps. And he is slightly overweight Information Technology by 140 bps, compared to a small underweight of 20 bps a year ago.

Underweight Energy, Financials & Materials

On the flip side, the fund has been and continues to be underweight in the three big sectors for which the Canadian stock market is famous: Energy, Financials & Materials. Financials (chiefly the big Canadian banks) were underweight 330 bps a year ago and Aitken has moved that to an even bigger 730 bps underweight this year. In Materials he has stayed largely pat, with a 530 underweighting today compared to a 550 bps underweighting a year ago.

The chart below shows the fund’s holding in Canadian financials. You can see that among the big Canadian banks, the fund is over the index weighting only for the Bank of Nova Scotia, and is slightly overweight Brookfield Corp. and Brookfield Asset Management:


However, Aitken has moved Energy (Canadian oil & gas stocks, pipelines etc.) from a small 20 bps overweight position last year to a 370 bps underweighting in 2023. The chart below shows the major Energy holdings relative to the index, with overweights in certain less well-known names: 


Aitken remains slightly underweight Consumer Discretionary stocks, moving from a 100 bps underweight last year to 150 bps underweight currently. Real estate is almost flat: from a slight 10 bps underweighting a year ago to a small 70 bps underweight today.  Continue Reading…

Life after Twitter: Mastodon & other alternatives

As I posted on Twitter a few days ago, Elon Musk’s ownership is causing a lot of Twitter regulars to rethink their commitment to the platform. Personally, I have invested a lot in the Bird since joining in 2009 and so I am reluctant to storm out of there merely out of sheer petulance. Better, I think, to take a wait-and-see approach and give Elon a chance to salvage it or to burn it to the ground.

But it does behoove regulars to have a contingency plan or Plan B. Once upon a time, I viewed Google Plus as an alternative but it proved to be a virtual ghost town until Google pulled the plug on it. If Twitter keep imploding, perhaps the folks at Google will think of giving it a go again. But in the meantime, there are still LinkedIn and Facebook.

While in Spain this month, I started to experiment with the platform that seems most likely to accumulate disaffected Twitter users: Mastodon. (spelt with the letter o in two places, NOT the letter “a”!

Unlike the centralized Twitter platform, Mastodon is decentralized and that’s the first thing you need to know about it when signing on. First you have to pick a server, which is run by volunteers around the world. I picked one of the few (or only?) Canadian ones: It’s also called Mastodon Canada and bills itself as being run by Canadians for Canadians

A new meeting ground for Canadian finance Tweeters and bloggers?


Perhaps it’s too early to say, or that it’s wishful thinking, but it seems possible that a critical mass of disaffected Canadian Twitter users may be building there, including a subset of Canadian financial tweeters; I mean tooters!

For me, Truth Social was never an option, for reasons that should be obvious, given its ownership. If there are other Canadian Mastodon servers and there may be, Google Canadian Mastodon servers.

Mastodon takes some getting used to and the learning curve seems steeper than Twitter was in its heyday. At the same time, it’s fun to give one’s atrophied social media little grey cells a new workout, and it’s a learning experience to see new networks and patterns of networks evolve almost from the ground up.

It was helpful to be fairly early with Twitter and in the same way Mastodon has that pioneering feeling here in November of 2022, the first full month of Elon’s Twitter ownership. Mastodon has been around much longer but there’s little doubt there is now a wave of Twitter users descending on the place. Most of the new arrivals admit they’re looking for a possible alternative, or don’t really know why they are there, and most either need a bit of help or encouragement or are a bit more experienced and willing to offer assistance to the newbies.

In fact, is so new they are still asking for volunteers to moderate and assist with the technical side for those who have the skills. They’ve also just set up a PayPal account to accept donations to offset the server costs.  Continue Reading…

Investing during Wartime: How does the Geopolitical Climate impact your Financial Planning?

By Steve Lowrie, CFA

Special to the Financial Independence Hub

Don’t let Geopolitical Strife destroy your Investment Resolve.

This month, I was planning to write about financial planning for small- to mid-size business owners, including ways to optimize your personal and corporate tax planning. I believe many of you will find the information useful, so I promise to publish that soon.

But not now. Not after Putin invaded Ukraine. It feels wrong to go about business as usual while most of us are asking important questions about this geopolitical crisis.

By no means do our financial concerns detract from the greater, human toll. That said, if I can help you remain resolute as the world justifiably severs Russia’s access to capital markets and the global economy, perhaps we can both do our part to restore justice in Ukraine.

So, let’s talk about geopolitics and investing during wartime. Here are my key takeaways:

Big picture, geopolitical events’ impact on financial markets are usually short-lived

To help you keep your financial wits about you, consider Vanguard’s historical perspective on how the U.S. stock market has responded to other geopolitical crises over the past six decades. As Vanguard’s chart depicts in the article Ukraine and the Changing market environment, the turmoil has typically translated into initial sell-offs. But markets have also exhibited remarkable resilience, delivering returns in line with long-term averages as soon as six months later. That’s not to predict the same outcome this time, but it reinforces the wisdom of betting for vs. against the market’s staying powers.

Credit: Vanguard – Ukraine and the changing market environment

In Vanguard Canada’s recent article, When the markets seem to turn against youGreg Davis, Chief Investment Officer recommends a steadfast approach:

“A new dimension of risk has entered the financial markets with heightened tensions in Ukraine …

We know this, however, about equity markets in the context of geopolitical risks: they’ve been resilient, much as markets have always been resilient in the face of various risks. We expect the markets to work themselves out, reaching new heights over time and at varying paces …

So now is not the time to give up your fortitude. Now is the time to take it all in with a deep breath, knowing that this day would come — and knowing that it will pass.”

Speaking of predictions, ignore those who claim to know what’s going to happen next

In their landmark studies on political forecasts documented in their book, Superforecasting: The Art and Science of PredictionWharton professor Philip Tetlock (a Canadian, by the way) and co-author Dan Gardner found that we’re unlikely to do our net worth any favors by depending on the “expert” predictions you may be seeing on the daily news:

“People who generate better sound bites generate better media ratings, and that is what gets people promoted in the media business. So, there is a bit of a perverse inverse relationship between having the skills that go into being a good forecaster and having the skills that go into being an effective media presence.”

In other words, those forecasts you’re hearing are more likely to sound like sure (often scary) bets, and less likely to be reasoned reflections on the many ways any given event might play out. In fact, evidence suggests, the more certain an expert seems about their forecast, the more skeptical you should be about its worth.

Continue Reading…

Dealers putting Clients’ Retirements in Jeopardy

By Nick Barisheff

Special to the Findependence Hub

Over time, most investment dealers have implemented misguided policies that will negatively affect their clients’ investment portfolios and their ability to achieve a secure retirement.

There are two main policies that have negative impacts on investors’ portfolios. One is restricting investments to a client’s original Risk Tolerance in the Know Your Client application form (KYC). When opening an account, the client will advise the dealer of their Risk Tolerance.  Most clients will indicate that they are medium risk. On March 8, 2017, the Ontario Securities Commission (OSC) implemented risk rating rules that require all mutual funds to rate their fund according to 10-year standard deviation. In 2018, I published an article entitled New Mandatory Risk Rating is Misleading Canadian investors.

Prior to the OSC’s implementation of the risk rating rules, on December 13, 2013, the OSC issued CSA Notice 81-324 and Request to Comment – Proposed CSA Mutual Fund Risk Classification Methodology for Use in Fund Facts. My comments on this policy were submitted to the OSC on March 12, 2014, along with comments from 50 other industry experts.  

I presented a paper to the OSC that argued that Standard Deviation is not an appropriate measure of risk, since the best-performing mutual fund and the worst-performing mutual fund in Canada had the same Standard Deviation.  The measure of Standard Deviation of an investment does not reduce the risk of incurring losses.

A better, more accurate methodology would have used downside standard deviation or the Sharpe or Sortino ratios which measure risk adjusted returns. Nevertheless, the OSC implemented risk rating rules requiring all mutual funds to rate the risk of their funds according to 10 year standard deviation.

As a result, if investments in a client’s portfolio exceeded the risk tolerance as indicated in the original KYC, the client was forced to redeem those investments, by the advisor’s compliance department. A number of BMG’s clients were forced to redeem their positions since our funds had a medium-high risk rating according to the OSC formula, and the clients’ KYC indicated medium-risk tolerance. A number of clients wanted to change the KYC in order to allow them to maintain ownership of our funds but were advised that, unless there was a significant change in their financial circumstances, they could not change their KYC. Continue Reading…

Ukraine invasion underlines investors’ need for super diversification

It’s scary times for everyone, investors included. As this site focuses on Financial Independence, I’ll try in this blog to direct readers to some useful sources of financial advice.

We’ll start with MoneySense, since in my role as Investing Editor at Large, I’m on top of much of the investing content there.

First, I’d point to Allan Small’s article that appeared over the weekend: The Meaning of market swings and why you should care. Allan recaps current trends in rising inflation and rising interest rates, noting that geopolitical uncertainties can create buying opportunities on certain stocks:

“The key is to make sure your portfolio is diversified. It’s the best — and cheapest — strategy to protect your portfolio in any environment. Balance it with different sectors of the economy.”

Second, Dale Robert’s weekly market wrap for MoneySense always has plenty of good insights into up-to-the-minute market action. His February 27th instalment of Making Sense of the Markets is particularly instructive. Hub readers will be familiar with Dale’s own site, Cutthecrapinvesting, as we regularly republish Dale’s blogs here on the Hub (with his kind permission, of course!).

Here’s Dale’s recent blog on the Ukraine situation. Here’s an excerpt:

“Even a few weeks ago it was easy to predict what would help investors make their portfolios more battle-hardened. Gold and energy certainly rose to the unfortunate occasion.”

Ever since Covid hit, Dale has been furnishing sound investment ideas, often ahead of the rest of the financial blogosphere. For example, he was one of the earliest to sound the alarm that Covid would be a serious problem for investors. He was also early in recommending energy plays like Eric Nuttall’s Nine Point Energy Fund (NNRG) and inflation-fighting recommendations like the Purpose Real Assets ETF (PRA.) That’s one reason why we included Dale as a panelist in MoneySense’s yearly ETF All-Stars feature: the 2022 edition will be out this spring, albeit under the direction of a new writer, Bryan Borzykowski.

No one ever made a dime panicking

How am I responding to the financial aspect of this crisis? Well, as Mad Money’s Jim Cramer often reminds readers in such times, “No one ever made a dime panicking.” Just yesterday, The Successful Investor publisher Patrick McKeough reminded Hub readers that short-term investment decisions all too often sabotage long term returns.

Patrick has been hugely consistent over the years with the following three-fold guidelines, which are as relevant during this Ukraine crisis as in they are in sunnier times:

1.) Invest mainly in well-established, dividend-paying companies;

2.) Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities);

3.) Downplay or avoid stocks in the broker/media limelight.

In his Inner Circle Advice bulletin issued after Tuesday’s market rout, McKeough titled one section “Putin goes for broke” while urging investors to stay the course if they adhere to the three points above:”In the past third of a century, Russia has gone from dictatorship to fledgling democracy and back to dictatorship. If his Ukraine venture goes awry, it could be the end of the Putin era and the start of a new try at western-style government for Russia.

“Meanwhile, we advise sticking with your portfolio if your investments are in tune with our Successful Investor directives. Now, though, is a good time to re-emphasize that recent IPOs tend to be a poor investment choice, on average. But that’s especially so in a market situation like this one, in which volatility is likely to be above average for some time.”

Some other newsletters to which I subscribe recapped historical market action in advance and during prior outbreaks of war and invasions; generally they found that investors who “bought the invasion” eventually did well.

On the other hand, in an article in the Globe & Mail this Monday, veteran commentator Gordon Pape suggested it wouldn’t hurt to raise cash where you have significant capital gains: while they’re still gains. You can find the article, albeit paywalled, by clicking on this highlighted headline: Investors should take these steps to protect their portfolios from  the Russia-Ukraine conflict.  Pape also warned, as have many pundits, that if Russia does get away with its Ukraine invasion, it may embolden China to make a similar move on Taiwan.  Continue Reading…