The S&P 500 is up more than 2 per cent in October. But if you look closer, it’s all about tech, which accounted for 75 per cent of the gains. Will big tech continue to power the markets higher? Kim Parlee talks with Iain Butler, Chief Investment Advisor at Motley Fool Canada.
We're going-- well, the question is, though, will these high-flying tech stocks continue to soar? Joining me now is Iain Butler. He's with Motley Fool. He's a chief investment advisor. And it is great to have you here again.
It's wonderful to be back.
OK. So the magic question, we're going to bring up the chart. We're going to show the returns on some of these stocks on a year-to-date basis. And it's just utterly spectacular. There's a look right now. I mean, this should bring a smile to everybody's face. But what do you do now?
You ride it out, I think. They've been wonderful. They're all-time highs. There's literally never been a bad time to own any of these companies.
I think valuations, there's not much of an argument to be made from a valuation standpoint. But there's little doubt that these are fantastic, fantastic companies. And they're getting better.
I mean, and that's the thing that's so interesting, right? Because this isn't just a valuation story. Because we were seeing money go into, really, all the markets and the whole thing. But technology is-- you know, we're in the midst of a structural shift of how everything is done. There's got to be some red flags in here, though, somewhere. I mean, what's a concern for you? Or what do you see when you look at the-- take some of the individual names.
Sure. I mean, from a business-- I think if you poke and prod a business hard enough, you're going to find a weakness somewhere. I think with all of them, though, the strengths far, far outweigh any weaknesses that you're going to come across. So from where we sit, these companies are just firing on all cylinders right now.
Let me ask you, if you've been holding these companies-- I mean, there's Amazon. I mean, look at that top right-hand side. I mean, it's vertical. It's a vertical line right now. Is it time to take some money off the table?
It's-- I mean, it's a personal decision. I think it depends on where your portfolio sits-- if you're tight on cash, if you've got other opportunities elsewhere that you're interested in. Or if Amazon-- if we're talking Amazon-- makes up a significant, maybe too big of a portion of your portfolio, then, sure, it makes sense.
There's also a bunch of scenarios that say, just let them ride. And do what they do. And check again in five years. And I think you're going to be more wealthy than you currently are.
Yeah. I mean, I guess that's the big thing, too. I mean, you look at these five-year horizons, you have to ask yourself, is Amazon going to be bigger or smaller than it is right now? But it could be bumpy in between.
Totally. Totally. And that goes back to the valuation situation. Yeah.
Let me ask you. Are there other ways to play these stocks? I mean, are there other ETFs, or other things that maybe just haven't had the same elevation, perhaps, as some of these names?
Well, I mean, I think ETF is a great way to gain instant exposure. They've grown to such a size in the NASDAQ, and more tech-specific ETFs that boom, one shot, you've got exposure to all of them.
Another way-- and I think maybe this is overlooked by some. Just buy a share in each, a single share in each. We run into a lot of times, people think that they have to buy 100 shares of companies. In this day and age, that's simply not the case. So just pick up a share. Leave it alone. And again-- And go away. --tune back in in five years.
Yeah. It's always, I think, one of those things-- I know, for my son's RESP, I always think, what is going to be important for you when you're 18? And then kind of find that it's done well so far. So.
I think RESP-- I have three young children. I think an RESP is a great way to lock in that thinking. It's like, yeah, 0 to 18. Let's just take an 18-year time frame, and we'll see how we do.
It's funny, too. I have more discipline with his RESP than I have with anything. Funny how that works. Any other, beyond these big, big names that are out there, any other tech place that you like right now?
Sure. Two come to mind. We're fired up about Shopify.
We're fired up about Shopify. Have been for some time. It's had its own magical run for the past year and a half or so, almost since its IPO. There it is on the board.
There was a bit of a dip back a couple of months after it IPOed. But since then, it's been straight up. And it's a company that's growing by leaps and bounds. We sort of see it as some of these tech companies were sort of in their relative infancy. We see that kind of future for it over the next decade.
Before we move on to the next name, though, what about Citron Research? I mean, they actually, I think, they came out with their report. And I know that's the little dip that we saw on the right-hand side of the chart. But they said-- they called it a get rich quick scheme. You know, the stock has bounced back a bit since they came out with that. But, you know, we were chatting a bit about, you know, I have shades of Valeant sometimes in my head, as I'm sure others do as well. I mean, how serious is this?
It's-- I'll boldly say that it's not Valeant.
And we actually take it as more or less noise from a obviously biased source. Short seller.
Citron's a short seller. And I think from the get-go, we were of the mind that it was more a legal matters that they were pointing out, legal matters on how the business was being conducted. Didn't really have an opinion on that. Shopify has checked with outside counsel, they mentioned on a conference call yesterday. Got clearance. And I think we're more of the mind to side with the company on that one.
OK, second name that you like?
BlackBerry. Amazingly. It's one that's fallen by the wayside, isn't in the minds of anybody. We took a look, though, after the most recent quarter, and actually liked several of the things we came across. For one, the handset business is immaterial, if not more or less dead. So the bleeding has stopped there. And they're building a more software-oriented company on top of some legacy assets, there, their security offering, as well as their extensive patent portfolio.
And I think most important, though, their balance sheet is in wonderful, wonderful shape. So they've got a lot of sort of fledgling initiatives. It's tough to really actually articulate what they've got going on. But they've got every opportunity in the world to succeed because of the financial condition of the company.
And I think it's also interesting to point out the CEO has been down this road before and is almost drawing from his playbook from the past-- from his past, almost page by page. And that company eventually ended up being sold. So we'll see. We'll see.
Let me ask you-- I'm curious, you know, because it's a great-- it's a sweetheart story for many of these stocks right now. But in terms of deploying new cash, I mean, it's one question, I guess, to say, hey, we're going to and hang on to what we have and just not take any gains, but just keep going. Deploying new cash. I mean, is there a bit of FOMO going on right now? Fear of missing out with people who are trying to get in and that's helping things a bit or--
I think, again, if you take a diversified approach, if you want exposure to tech, buy them all. It's hard to single out one. Again, there's not a valuation case behind any of them. And all the businesses are doing fantastic. So I think get exposure to all of them. And forget about it.
Time horizon is so important when it comes to investing.
It really, really is. All right. Well, great to have you here, Iain. And we'll have you back again soon.
Excellent. Great to be here.
Iain Butler. He's a chief investment advisor with the Motley Fool.