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Making sense of the markets this week: October 19

October 16, 2020 Dale Roberts
Making sense of the markets this week: October 19

Using moats can be a common consideration for investors. I use them myself for my concentrated Canadian stock portfolio. I hold three of those wide moat companies: Royal Bank, TD Bank and Enbridge. I also hold Scotiabank plus a few telcos and another pipeline. So far, I have no dividend cuts in 2020 while I have enjoyed some dividend increases.  

From my research, all of the sectors with moats—banking, telcos, pipelines, the major grocery companies and railways—all beat the TSX Composite over the last 20 years. I am still surprised that there is no ETF for this strategy. 

If you build your own stock portfolio, or are considering layering in some stocks with your ETF portfolio, you might consider that list from Ruth and Morningstar. 

You’ll find some moats and generous earnings. 

U.S. earnings projected to be “not as bad”

It’s earnings season again. And that means it’s time to read the tea leaves. Earnings reports help us to get a true sense of the economic recovery that is in motion. 

Here are some expectations from MarketWatch. The estimates in the following quote are with respect to the total earnings and sales trends for the total of S&P 500 constituents. 

“S&P 500 companies’ overall earnings performance is expected to be less bad than the second quarter, when earnings fell the most since the 2008 financial crisis, according to FactSet data. The aggregate blended year-over-year growth estimate for S&P 500 earnings per share, which includes some earnings already reported and the average analyst estimates of coming results, is negative 20.5% as of Friday morning [Oct. 9, 2020], following a 31.4% plunge in the second quarter.

“The third-quarter outlook does stand out a bit, however, as the current estimate of a 20.5% decline compares with the estimate of a 24.4% drop as of June 30.

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