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Views from the Hill  
An off-the-cuff forum to comment on the trends
and happenings we see affecting markets.

Views from the Hill

Apr

4

2016

Aston Hill U.S. Conservative Growth Fund Celebrates its 1-Year Anniversary!

Posted by Darren Cabral*


Comments from the Portfolio Manager

Aston Hill U.S. Conservative Growth Fund celebrated its first anniversary on March 31, 2016.  I came on board in mid-July of 2015 and we judiciously modified the strategy early in the Fund’s life, which resulted in the addition of “conservative” to its name to better reflect our approach.  From our perspective, any fund that purports to be “conservative” should have two very important goals.  First, a conservative fund should be resilient in times of adversity. In challenging markets, it should do a better job of preserving your capital.  Second, a conservative fund should exhibit considerably less volatility than the broader equity market. If equity markets are rollercoasters, our job is to strap in and make them feel more like riding the tea cups.

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Jan

27

2016

A conservative approach to adding exposure to energy stocks

Posted by Darren Cabral*


Energy stocks have been on a steady decline since the middle of 2014 and downside momentum accelerated in the early half of January leaving many to believe that a bottom is nowhere in sight.  Being underweight energy is very much a consensus position and it has been the right call thus far.

We have maintained little to no direct exposure to energy stocks in the Aston Hill U.S. Conservative Growth Fund (the “Fund”)**, toeing the consensus line, however that doesn’t mean we haven’t been making money from energy stocks. Our strategy for much of the latter half of 2015 has been to sell put options at strike prices that are significantly below where each energy company currently trades and expire in the not too distant future to capture an attractive premium, typically yielding anywhere from 0.5% to 1.0% (or 6% to 12% annualized), thanks to the elevated volatility in energy names.  So long as the price of the stock we have written puts against doesn’t fall below our strike price, our return will be positive. This strategy provides a lower risk way of profiting from energy stocks without owning them, and our downside will be far less than had we simply bought energy stocks (our downside only kicks in after the stock price falls below the strike price).

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Jan

15

2016

What a week

Posted by Ben Cheng

Today’s move capped off one of the worst weeks the equity markets have ever seen.  As I look at my end-of-day screens, the Dow and S&P 500 are both down over 8% YTD, while the TSX is down more than 7%.  Meanwhile, the High Yield market has been ‘stellar’ in 2016 as it is only down 1.7%.

Uncertainty over China still abounds and we will continue to see the markets unravel until we get some definitive statements from the People’s Bank of China.  Added to this uncertainty, I believe that the U.S. economy is not immune to the trouble outside their borders – and that is the main source of this volatility.  I find it almost amusing at this juncture that we still have respected bank economists predicting that the Fed will raise rates at least four times this year.  At this pace, I would be stunned if the Fed raises rates more than once.

We continue to put cash to work on weakness and we continue to layer in option hedges / risk reversals to provide some protection on the downside.  

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Nov

12

2015

Eight CEOs in Two Days

Posted by Andrew Hamlin


I just returned from spending two days with CEOs of U.S. trucking companies in NYC. This provided a good “boots on the ground” read on the economy, as trucking companies haul freight, and freight demand is “the” barometer on the health of the economy.

There are a few high level takeaways I wanted to share:

  1. The majority of CEOs do not believe the U.S. is going into a recession next year; they give it a 10% chance of happening.
  2. CEOs were not bearish, but they were cautious about the soft freight demand environment and most said this will continue into 2016.
  3. Peak shipping season (American Thanksgiving, Christmas) should have been upon us now – most CEOs have not seen it yet, but this could change very quickly.

Weak freight areas:

  • Retail goods – consumers not buying and inventory remains bloated, although some destocking occurred in October
  • Industrial goods – manufacturing is experiencing very slow demand

Strong freight areas:

  • Automotive – lots of shipments to auto plants and tier 2 suppliers
  • E-commerce – very, very strong
  • Intermodal – decent demand

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Oct

19

2015

Equity Market Volatility: So now what?

Posted by Andrew Hamlin & Helen Liu


During all periods of volatility, the knee jerk reaction is to sell stocks, preserve capital and go to cash. For long term income investors, we think this is the wrong approach.  

From where we sit today, stock valuations are reasonable. Dividend increases remain strong. Share buybacks continue in force. Interest rates will be low for a while. Yes, growth is anemic, but we are making the case that during this period of volatility investors should continue to own stocks. To generate a long term consistent return there are few alternatives in this current low interest rate environment, but for income investors this could not be a better time to own high quality equities that pay growing dividends.

Firstly, let’s look at the bond market. With ample global liquidity, and certainly what looks like an environment where the world will have to get used to lower for long on the rate side, the bond market (absent high yield corporates) looks to generate very anemic returns globally. Indeed in Exhibit 1 we show 10 year government bond yields by country compared with dividend yields on the major indices in those countries. Owning bonds in this environment is not going to generate anywhere close to an adequate return.

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FIRST
LAST

Disclaimer:
This commentary is published by Aston Hill Financial Inc. (“Aston Hill”). The information contained herein does not constitute a recommendation by the authors or Aston Hill to buy or sell any of the securities, commodities, currencies or other financial instruments or assets discussed herein. This commentary has been prepared using information from sources that the authors and Aston Hill believe to be reliable, however neither the authors nor Aston Hill guarantees the accuracy of such information. This report does not constitute and may not be used for the purposes of effecting an offer or solicitation of units of any Aston Hill investment products. Commissions, trailing commissions, management fees and expenses all may be associated with investment funds. Please read the prospectus and other publicly filed documents available at www.sedar.com before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

Please correct the following errors:

Minimum Investment Requirements

The AHF Credit Opportunities Fund is generally available to investors that can meet a certain minimum amount of money to invest. The minimum initial investment for residents in any province or territory in accordance with applicable securities laws is set out below:

All provinces and territories $125,000 or $25,000(1)
BC, NB, NS and NL Only: $5,000(2)

Notes:

(1) A minimum purchase of $25,000 is available to residents who meet certain requirements.
(2) A minimum purchase of $5,000 is available to residents who meet certain requirements and reside in BC, NB, NS and NL by way of the prescribed OM.
Investors should contact their investment dealer or Financial Advisor for more information.

If you can comfortably invest the minimum dollar amount required in your province or territory, please accept the disclaimer below to learn more about the AHF Credit Opportunities Fund.


Disclaimer: Information pertaining to AHF Credit Opportunities Fund is not to be construed as a public offering of securities in any jurisdiction of Canada. The offering of units in the AHF Credit Opportunities Fund is made pursuant to its offering memorandum only to those investors in jurisdictions of Canada who meet certain eligibility requirements. Please read the offering memorandum carefully before investing.

Minimum Investment Requirements

The Aston Hill Opportunities Fund is generally available to investors that can meet a certain minimum amount of money to invest. The minimum initial investment for residents in any province or territory in accordance with applicable securities laws is set out below:

All provinces and territories $150,000 or $5,000(1)
BC, NB, NS and NL Only: $5,000(2)

Notes:

(1) A minimum purchase of $5,000 is available to residents who meet certain requirements.
(2) A minimum purchase of $5,000 is available to residents who meet certain requirements and reside in BC, NB, NS and NL by way of the prescribed OM.
Investors should contact their investment dealer or Financial Advisor for more information.

If you can comfortably invest the minimum dollar amount required in your province or territory, please accept the disclaimer below to learn more about the Aston Hill Opportunities Fund.


Disclaimer: Information pertaining to Aston Hill Opportunities Fund is not to be construed as a public offering of securities in any jurisdiction of Canada. The offering of units in the Aston Hill Opportunities Fund is made pursuant to its offering memorandum only to those investors in jurisdictions of Canada who meet certain eligibility requirements. Please read the offering memorandum carefully before investing.

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Markets

May 26, 2016 15:49 EDT

AHF-T -0.01 icon-arrow-down-red-small.png 0.14
S&P/TSX 16.07 icon-arrow-up-green-small-dark.png 14,069.81
S&P 500 1.18 icon-arrow-up-green-small-dark.png 2,091.72
Dow Jones -10.24 icon-arrow-down-red-small.png 17,841.27
NASDAQ 11.22 icon-arrow-up-green-small-dark.png 4,906.11
CAD/USD 0.00 0.77
Oil (NY) -0.24 icon-arrow-down-red-small.png 49.32
Gold -3.50 icon-arrow-down-red-small.png 1,220.30
Natural Gas -0.03 icon-arrow-down-red-small.png 1.96
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