2022 Stock Picks

I recently realigned a small equity portfolio I maintain in my active trading account to better reflect what I think will the the market environment for the rest of this year and possibly into 2023.  I shifted away from individual stocks and selected a basket of sector ETF's that I think will perform well in an environment where earnings matter, dividends are appreciated, inflation is persistent and high sales multiple stocks are shunned.  In the current high-volatility stock market environment, my goal is preservation of capital, dividend yield and positioning for potential upside for gold, silver and Bitcoin given geopolitical risks and the fragile state of the global monetary system.

Here's the breakdown:

• Global X Silver Miner's ETF (SIL) - 16%

  • Rationale:  leveraged bet on inflation and weaker dollar and should outperform gold and industrial demand, particularly electronics and electric vehicles should be strong; 1.8% dividend yield

• Grayscale Bitcoin Trust (GBTC) - 15%

  • Rationale:  inflation and weaker dollar, continuing adoption of Bitcoin globally and big discount to NAV

• VanEck Gold Miner's ETF (GDX) - 15%

  • Rationale:  leveraged bet on inflation and weaker dollar; 1.8% dividend yield

• Select Sector Healthcare (XLV) - 13%

  • Rationale:  resilient regardless of economic cycle/defensive, inflation resistant and 1.5% dividend yield 

• Select Sector Industrials (XLI) - 10%

  • Rationale:  continued economic growth, even weak will benefit and inflation resistant; 1.3% dividend yield

• SPDR Fund Materials Select (XLB) - 8%

  • Rationale:  solid inflation hedge (includes industrial metals and materials as well as precious metals); 1.8% dividend yield

• SPDR Fund Consumer Staples (XLP) - 8%

  • Rationale:  resilient regardless of economic cycle but will do well if growth is weak or recession/defensive; 2.3% dividend yield

• Select Sector Utilities (XLU) - 7%

  • Rationale:  resilient regardless of economic cycle but will do well if growth is weak or recession/defensive; 3% dividend yield

• Energy Select Sector SPDR (XLE) - 7%

  • Rationale:  global supply / demand dynamics should continue to drive outperformance; 3.5% dividend yield

• Cash - 1%

So far, this portfolio hasn't done that great due to weakness in the gold and silver miners and Bitcoin, especially given their weighting (46% of the portfolio), but I think that situation will change as the year moves on and inflation persists.  There are also some geopolitical risks (like Russia/Ukraine, Taiwan) that could also drive a "flight to safety" bid.  I still think the gold/silver miners are relatively cheap compared to other stocks if you look at earnings multiples, you get paid to wait with good dividend yield and have a lot of upside potential if gold and silver prices move up significantly in the coming months.  

I hope you find this post useful as you chart your personal financial course and Build a Financial Fortress in 2021.  To see all my books on investing and leadership, click here.  

Also check out my new podcast on Podbean here.

Stay safe, healthy and positive.