COVID-19 crisis: an alternative route for investors
“We are always reluctant to put price targets on these things. Gold is not something you can analyze and look at future earnings, but we do have insights to the flows of the commodity and the use of it, and we see a target of about $2,000/oz by the end of the year.”
Despite gold rising to levels not seen in almost a decade, MacNicol believes it is not too late to gain exposure. “Gold is definitely under-owned by Americans and U.S. intuitions. We have seen reports that gold is only 1-3% of portfolios; the commodity and miners. So, we see a lot more uptake there as institutions start to look for safe harbours.”
An area that gets many questions, especially in Canada is the energy sector. Some companies have been priced attractively, yet the team at MacNicol have not been so quick to jump in. “There is a lot of pain being felt in the sector,” said Joe Pochodyniak, senior portfolio manager. “CAPEX (maintenance and development) and dividends are being slashed and workers are being let go. Right now, with oil prices falling dramatically many projects are on hold so operators are not spending money to secure new assets or upgrade existing ones. As a conservative manager, we prefer to wait past the all-clear period.”
For Pochodyniak, one area he is high on is private equity, despite the overall economic slowdown. “There is a lot of cash that is looking for a home, so I think it will keep some upward pricing pressure on private equity, maybe not to the extent pre-COVID-19, but when we get to the other side, we’ll see the benefits of private equity and new opportunities.”
When it comes to private equity, one thing that both Pochodyniak and MacNicol said advisors need to be aware of is the difference between late-stage private equity and venture capital, which sometimes get lumped together.