I’d like to start this month with an announcement: My stock—German automaker Daimler (DDAIF)—was the winner in InvestorPlace’s Best Stocks of 2013 contest with total returns including dividends of 65%. Daimler is currently the largest holding in my Sizemore Global Macro portfolio at Covestor.
This year, in the Best Stocks of 2014, I chose African mobile communications leader MTN Group (MTNOY), which is consistent with my view that emerging markets will assume leadership. I’m off to a slow start in 2014; at time of writing I am in 10th place. But over the course of 2014, I like MTN’s chances of giving me a repeat win. MTN is also a recent addition to the Sizemore Global Macro portfolio.
On a side note, I’m competing against some of my own positions in this year’s contest. Bryan Perry recommended Banco Santander (SAN), which I hold in both my Sizemore Global Macro portfolio and my Dividend Growth portfolio. And Brenden Conway’s choice for 2014—the Vanguard Dividend Appreciation ETF (VIG)—is a long-time holding of my Tactical ETF portfolio.
You will see a handful of consistent themes across Sizemore Capital portfolios:
- I am overweight Europe and emerging markets.
- I am overweight dividend-paying U.S. equities.
- I am underweight non-dividend-paying U.S. equities.
While I remain broadly bullish on U.S. equities in general, in my view they no longer offer compelling value. After five years of nearly uninterrupted bull market, the easy money has long since already been made. I expect U.S. investors to return to a focus on quality, which should favor dividend payers over non-dividend payers.
Looking overseas, I see much more attractive pricing and better opportunities for capital gains. Europe, by and large, has not participated in the past five years’ worth of bull markets, and the continent is only now starting to emerge from its post-crisis, austerity-driven recession. And most emerging markets—which collectively were a fantastic asset class for most of the 2000s—have traded sideways or down since 2011. 2013 was the first year since the crisis where investors really chose to embrace risky assets. Now that they are at long last comfortable investing again, I expect them to flock to the markets with the most attractive pricing—which again, I see as being Europe and emerging markets.
Finally, now that tapering has finally begun, I expect investors to reevaluate income securities. Dividend paying stocks and, particularly, “bond substitutes” such as REITs were dumped indiscriminately in 2013 as investors, terrified of what tapering might mean, sold first and asked questions later. But as the reality sets in that inflation remains near generational lows and Fed tapering will be a slow process, I expect all yield-focused investments to enjoy a healthy rally in the first half of 2014.
Disclosure: Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering market insights, global trends, and the best stocks and ETFs to profit from today’s exciting megatrends.