Modern Investing Techniques — Episode 30

Midweek check-in. Welcome to Modern Investing Techniques, episode thirty. I'm Patrick in Vancouver. Today is April twenty-ninth, twenty twenty-six. Midweek — let's reassess this week's positions and look for fresh setups. Quick reminder — everything we discuss here is for education and entertainment. The Practice Investment of the Day uses simulated trades with no real money. I'm not a licensed financial advisor and this isn't financial advice. Always do your own research before putting real money to work. Big Tech earnings and Powell’s final F O M C tomorrow loom as stagflation concerns weigh on private credit and energy supply chains. Markets retreated modestly today with the S and P five hundred closing at seven thousand one hundred thirty nine down zero point five percent. The NASDAQ Composite finished at twenty four thousand six hundred sixty four down zero point nine percent. The T S X Composite closed at thirty three thousand five hundred eighty four down zero point seven percent. Sentiment is cautious ahead of quarterly results from four of the world's most valuable companies and the Fed's rate decision. The focus is squarely on artificial intelligence revenue growth, cloud performance, and whether rate cuts are now off the table. Our simulated portfolio stands at year to date minus zero point five two percent versus the NASDAQ up six point one five percent for an alpha of minus six point six seven percent. Since inception that alpha is minus ten point seven five percent. We need a strong week here. This echoes our T M U S relative value rotation from about fifteen days ago that captured zero point six one percent alpha by spotting superior risk reward in U S telecom. With sentiment this fragile the difference between surviving and thriving comes down to how you triage quality inside challenged sectors. Which is exactly what we are covering in today's Strategy Spotlight. Quality triage in challenged sectors means systematically ranking names instead of avoiding the entire sector. The ranking uses leverage below one point one times, investment grade status, portfolio scale, mark to model realism, and premium to net asset value. This identifies the best of a bad lot when headlines look ugly. Today's conditions make it relevant because current parallels to the nineteen seventies are harder to ignore. Committee debate now centers on admitting rate cuts are off the table. In practice you screen business development companies using those leverage and rating filters. For example the largest publicly traded one has a twelve point eight billion dollar market cap and a twenty two billion dollar investment portfolio. It runs at one point zero five times leverage and ranks highest among thirty nine names despite one hundred percent private credit exposure. This approach worked best during late nineteen seventies repricing cycles when quality names survived sector wide markdowns. Higher leverage peers got hit first in those environments. Risks include net asset value lagging reality by one to two quarters. Accumulated losses can appear only in the second or third quarter reports. The strategy therefore demands strict position sizing and readiness to reduce exposure on any sector wide liquidity squeeze. The one line takeaway is quality mitigates but does not eliminate sector headwinds when mark to model accounting delays loss recognition. This same discipline of looking past headline prices carries over into how we should think about dividends and special distributions. A lesson many retail investors learn the hard way. Imagine you had been watching S T N E around fourteen dollars only to see it issue a two dollar per share special dividend after selling part of its business. The quoted price dropped to roughly eleven to twelve dollars. Many retail investors immediately think they are getting a better entry with a lower breakeven point. What actually happens is that on the ex dividend date the opening price is mechanically reduced by the dividend amount. All else equal the prior owner receives the cash while the new buyer purchases the company at its now smaller asset base. Your total economic position is unchanged. In Canadian tax advantaged accounts like a T F S A the two dollar dividend is received tax free. Yet the adjusted cost base for capital gains purposes drops by the dividend amount on special distributions. Platforms and quote feeds automatically adjust the displayed price but they rarely flag the simultaneous change in the company's enterprise value. The biggest misconception is treating the post dividend lower share price as an automatic bargain. Without recalculating valuation multiples on the reduced asset base. Always compare pre and post dividend enterprise value over E B I T D A or price to sales on the core remaining business. Adjust your T F S A or R R S P position size accordingly. Speaking of disciplined valuation we have a same day Flash Trade today that perfectly demonstrates comparing forward multiples across an entire sector instead of chasing momentum. This is a simulated trade for educational purposes only. No real money is involved and this is not financial advice. Today's Flash Trade is E X E or Expand Energy on the New York Stock Exchange. It was formed by the Chesapeake Southwestern merger and is now the largest independent United States natural gas producer. The name sits at the cheapest sector multiple of twelve point six one times forward earnings. Consensus target is one hundred thirty five dollars against recent levels around one hundred seven dollars. The daily chart shows the stock below longer term resistance but supported by volume confirmation in energy names. We are using a five percent stop loss on a one thousand dollar simulated position. The target is between one percent and four percent by tomorrow's close. Confidence is medium because two factors are aligned. Those are the cheapest multiple in the sector and the structural liquefied natural gas tailwind from the merger scale. One uncertainty remains around broader macro repricing timing. This trade demonstrates how to isolate relative valuation and post merger scale advantages. It trains you to compare forward price to earnings across an entire industry rather than chasing headline momentum. The exercise also shows why verifying the same consensus data across multiple providers is required before committing capital. Before we get to the tools let us review how yesterday's catalyst driven Flash Trade on C L D X played out. We entered C L D X at thirty five dollars and seventy nine cents at market open. We exited at thirty four dollars and thirty eight cents at market close. That produced a three point nine four percent loss or thirty nine dollars and forty cents on the one thousand dollar position. Alpha data was unavailable from the primary tracker for the exact holding window. The realized loss still produced negative alpha versus the NASDAQ Composite move over the same period. Despite the publicly confirmed positive catalyst the stock moved against us because expectations had already been priced in. Sector momentum was missing which is a pattern we have seen before. This reinforces the critical need for multi source verification to judge true alpha versus the NASDAQ. The new rule is always verify data availability from multiple providers before declaring a weekly hold closed. The edge we are hunting in these trades often shows up first in unusual options flow and dark pool prints. Which leads us to today's Tools and Techniques. Unusual Whales surfaces real time options activity and dark pool prints. It lets individual investors see where institutions are positioning ahead of binary events such as F O M C decisions or earnings releases. The platform quantifies flow size and strike clustering that often precedes price moves by twenty four to forty eight hours. Canadian users running T F S A portfolios can overlay the flow with T S X listed names or United States A D Rs. Access the free tier for basic alerts or subscribe for full order flow visuals and scanner. Stash Away is a Canadian robo advisor that builds and rebalances exchange traded fund portfolios according to your risk tolerance. It automatically harvests tax losses inside non registered accounts while keeping T F S A and R R S P allocations fully invested. This delivers an edge for busy professionals by removing emotional decisions and maintaining global diversification. Fees are competitive with do it yourself brokerages though users note room for better performance reporting and mobile experience. Sign up and run a side by side comparison of its model portfolio returns versus your own last twelve month do it yourself results. While those platforms help you see institutional positioning the market itself is sending some clear signals this week. Here are the Quick Hits. Visa processed fourteen point two trillion dollars in transaction volume last year. That is up from five point seven trillion a decade ago indicating sustained strength in consumer and business spending. Add V to your T F S A watchlist and buy on any two percent pullback to the twenty day moving average. Tomorrow is the most important day of the quarter with big tech earnings after the close plus the Fed's interest rate decision. Trim ten percent of any single tech names exceeding eight percent portfolio weight before tomorrow's close to manage event driven volatility inside your R R S P. G O O G L hit three hundred fifty dollars an all time high. Further gains of roughly seventy dollars per share would push market cap past five trillion dollars. If already long G O O G L in your T F S A set a limit sell order at three hundred fifty five to lock in partial gains ahead of the print. The T S X moved lower finishing down more than one hundred points. Uncertainty over the Iran situation weighed on sentiment. Pause new Canadian energy exposure this week until the Bank of Canada rate decision clarifies the domestic policy response. And that brings us full circle to the Listener Challenge that ties today's education and strategy together. Open your brokerage account and pull up one stock you already own that has paid a dividend in the past twelve months. Note the ex dividend date and the price drop that occurred. Then recalculate its current forward price to earnings on the post dividend asset base. Spend under ten minutes and you will immediately see whether your cheaper looking entry was real or illusory. Before we wrap I have my eye on how the energy sector digests tomorrow's Fed decision and big tech capex guidance. That's your Modern Investing Techniques for today. Every episode makes you a sharper investor. Subscribe, leave a review, and we'll be back tomorrow with more market intelligence. This podcast is curated by Patrick but generated using AI voice synthesis of my voice using ElevenLabs. The primary reason to do this is I unfortunately don't have the time to be consistent with generating all the content and wanted to focus on creating consistent and regular episodes for all the themes that I enjoy and I hope others do as well.