Patrick Jamin has a big-picture focus. After capping a banner
year in 2013, the chief investment officer for NorthCoast Asset
Management tweaked allocation to some of the four NorthCoast ETF
Retirement Portfolios, while holding others steady.
In January, some of Jamin's big winners from 2013 faced
short-term resistance. Valuation concerns for domestic stocks and
volatility in emerging markets have tested investor resolve.
Jamin is up for the challenge as his holdings have remained
largely intact. Here are highlights from the first month of
IShares Core S&P 500
) remained a staple NorthCoast holding in January as attention
shifted to corporate earnings results.
Nearly 80% of companies that have reported have topped
analysts' predictions. "It is still relatively early in the
earnings season," Jamin said. "The average reaction of the stock
price of companies on the day of their earnings reports has been
slightly below that of the market on those days. This trend is
suggesting a relative disappointment of investors."
IVV has pulled back to the tune of 5% so far this year.
IShares MSCI EAFE (
) held on as the top holding in three of the four portfolios. In
Tactical Growth, the position in
) was bumped up 6% to 11% and in iShares MSCI EAFE 5% to 30%.
Both funds are rich with U.K. stocks. "We see two main risks in
Europe at the moment," he said. "The first is the health of the
banking system, which is still undergoing an asset-quality
assessment from the European Central Bank, and the second is the
end of several bailout programs."
These risks have not dampened Jamin's favorable outlook for
the region as U.K. consumer confidence rose to its highest level
since 2007 in January. "The data is pointing to a recovery with
these readings," he said. "The ECB is expected to remain
supportive, with room to further stimulate growth by loosening
Shares of both EFA and IEV posted declines of 5% during the
IShares MSCI Emerging Markets (
) experienced head winds in January. A report that Chinese
manufacturing might contract for the first time in six months
highlighted concerns about growth. "We have been surprised by the
weaker-than-expected Chinese economic data," Jamin said. "There
has been a substantial outflow from emerging market equity funds
this year." EEM fell 9% during the month.
Tactical Growth's position in Barclays Short Treasury was
slashed by 13% to 8%.
IShares iBoxx $
High Yield Corporate Bond (
) continued to anchor the Tactical Income portfolio as its top
holding. HYG ticked up 0.4% in January. "While we have stayed
away from mid- and long-term government bonds, we see some
opportunities in the credit sectors where higher yield and lower
durations can be attractive," Jamin said.
Jamin also likes the prospects of
National AMT-Free Muni Bond (MUB), up 3% this year and a new
addition to Tactical Income. "Beyond the preferential tax
treatment, it can benefit from improvements in the fundamentals
of the municipal markets as well as rising taxes," he said.
Positions in iShares Barclays MBS Bond and 1-3 Year Credit
Bond were trimmed by 5% each.
Preferred Stock (PFF), up 3% this year, has surged out of the
blocks for Tactical Income. "In the current environment of
stretched equity valuations and Fed tapering, we believe PFF sits
at the sweet spot between appreciation potential and yield,"