Welcome to Fill the Gap, the official podcast series of the CMT Association, hosted by David Lundgren and Tyler Wood. This monthly podcast will bring veteran market analysts and money managers into conversations that will explore the interviewee's investment philosophy, their process, and decision-making tools.
By learning more about their key mentors, early influences, and their long careers in financial services, Fill the Gap will highlight lessons our guests have learned over many decades and multiple market cycles. Join us in conversation with the men and women of Wall Street who discovered, engineered, and refined the discipline of technical market analysis. ♪
Fill the Gap is brought to you with support from Optima, a professional charting and data analytics platform. Whether you're a professional analyst, portfolio manager, or trader, Optima provides advanced technical and quantitative software to help you discover financial opportunities. Candidates in the CMT program gain free access to these powerful tools during the course of their study. Learn more at Optima.com.
Hello and welcome to episode 40 of Fill the Gap. My name is Tyler Wood. I am a CMT charterholder. And as always, I am joined by the illustrious David Lundgren. How are you doing, my friend? I'm doing, I guess, illustrious. You look fabulous. Clearly, 15 hours of sunshine at the bull market doesn't hurt, right? Exactly.
Today we were joined by Janine Gunther, CFA CMT from Vancouver, British Columbia. She runs concentrated portfolios for clients and we really dug into process and tools and her approach to markets. So many great takeaways, but Dave, for you, what were the big highlights? Well, what I love about these conversations is just learning how people make practical use of technical analysis. And one of the conversations we had about
about how about investing is so much about looking into the future. And we kind of become untethered to the present. And so we just kind of like focus so much on the future that we kind of lose
lose awareness of the present. And that's what technical analysis is all about. I mean, the perception is that it's about forecasting and trading and all this other stuff, which is not necessarily not, but the greatest strength of technical analysis, and frankly, it's the only form of analysis that I know of that does this, is it roots you right back into the present in the sense that I have all these views, I've done all this analysis, I have these conversations that kind of guide me to whether or not something is a buy or a sell. But at the end of the day,
technical analysis roots you in the present moment because the stock is either trending or it's not. The market either agrees with you or it doesn't. And so what you're looking for is you want to find all those stocks that you do all that work on and you feel bullish on them, but you want the market to agree with you. And I think that was an important part of the conversation because it's underappreciated just how important of a role technical analysis has in retethering us to the present.
Absolutely. And clearly, she was gifted the opportunity of getting to spend time with William O'Neill and company, even having the chance to meet the great William O'Neill himself, who really is kind of the grandfather of, or at least maybe the most familiar name in fusion investing, combining fundamentals and technicals into a distinct view.
I also loved, you know, Janine's comment. There's obviously a lot of math involved, any indicators, any data analysis we're doing either on market data or company data, but that the art behind this is something that you learn through experience. It's something that you find which works for you. And that's very individual, right? And I think the honesty to admit that
Yeah, I have my own biases, I think was what Janine said, and I know what works for me. I think that's a real key takeaway for a lot of investors. But she's not using one tool in isolation. She is combining...
on her technical side, trend, momentum, volume, and then on the fundamental side, looking at things like cash flow and making sure that she's making sound investments for clients rather than speculative gambling. I think Tom Bruni posted the other day that you got to know what game you're playing. If you're going to be dabbling in meme stocks, just know that you're at the casino. You should be managing risk as though you're at the slots. Precisely. Yeah.
Really, really great conversation. I want all of our, uh, our listeners to fill the gap, to enjoy this episode with Janine Gunther, CFA CMT here on episode 40 of fill the gap. Hey Dave, what a phenomenal interview that was with Janine. Uh, one of the things that, uh, I wanted to do this month was just to congratulate all of our CMT candidates, uh, who are sitting their exams here in the first couple of weeks of June, uh,
We know how rigorous it is. We know you've given up your nights and weekends and your free time to study. But hopefully these episodes and these conversations that Dave and I get to have with professional money managers help bring things into alignment. Yes, you're studying the formulas for every indicator known to the technical community, but we want you to also keep your eye on how to put this all together. Dave,
Any message you've got to the current candidates in the CMT program or those who are listening that might be thinking about maybe they should enroll one of these days? Yeah, sure. I mean, I think my story was that I had to take the test on two different occasions.
And the first, my first time through, I won't get, get into the story, but I ended up not taking three and enough time lapsed that I, what I couldn't just take three. I had to take the whole process over again. And needless to say, in that moment, I was not happy about having to take the whole process over again. But I will tell you that I am actually very thankful that it went that way because by that time I had, I don't know, 15, 20 years of experience in the business, but, but
but to then re-route myself in the essentials of technical analysis was such a kickstart for me. I was so thankful in hindsight that that's the way it went. I just think the quality of the program and the content is
what I love about it is it's practical. I mean, everything you learn, you can pretty much close the book and start using right away. And I just encourage those that are studying for it and passing the exams and whatnot to just make good use of this content because it really is practical and usable from day one.
Fantastic. So for all of you listeners, the enrollment period for the December CMT exams is open. You can head to cmtassociation.org. It's right there on the homepage. Check out all of the learning objectives, the knowledge that you'll cover over the three levels. And if you have any questions, feel free to reach out to me directly, tyler at cmtassociation.org. Thanks so much, Dave. We'll see you again next month. All right. We'll see you.
Welcome to Fill the Gap, the official podcast of the CMT Association. My name is Dave Lundgren, and as always, I'm joined by my friend, fellow CMT charterholder and co-host of Fill the Gap, Tyler Wood. So technical analysis has many aspects to it, ranging anywhere from stock selection and market timing to position sizing and risk management.
But the one aspect that is perhaps most important but simply does not get enough airtime is investor behavior and all the things that we do to ourselves and our portfolios that undermine our long-term results.
So in this month's episode of Fill the Gap, we're joined by Janine Gunther. Janine is a dual CMT and CFA charterholder who runs a family wealth advisory practice in Vancouver, B.C. She has over 35 years of experience in the financial business, ranging from banking and credit to portfolio management and now wealth management. In her own words, she has seen people and companies at their best and their worst and
with the fine line between the two coming down to education, experience, and perspective. Given the return of meme stocks in the MAG7 and so many more shiny objects to distract investor attention, now feels like the perfect moment to have this conversation. So with that, Janine, welcome to Fill the Gap.
Thanks so much, Dave and Tyler. Happy to be here today. It's great to see you. Looks like a sunny day in Vancouver, Janine. It is sunny. It's always sunny in Vancouver. Don't tell the masses. Keep it to yourself. Exactly.
So, Janine, before we jump into this conversation, which is going to have many facets to it, I'm sure, why don't you tell our listeners a little bit about yourself, how you got into the finance business, but also tie in how it is exactly that you get yourself to technical analysis. For sure. So I started in this business at a really early age, probably around six years of age. My parents owned a grocery store in rural Manitoba.
And my dad and I started reading Forbes magazine together. And we read kind of one story a week, careful not to break the spine of the magazine so we could still sell it. And I really got super interested in companies, how they work, how we're going to make money, and how I could translate that into a career.
And so when I graduated from university in 1989, it really wasn't a very hospitable environment. And so I took a job as a banker. And one of my first assignments was in special credit, so bad loans. And that really gave me a perspective on debt and how people and companies and leadership act under pressure.
And that really led me to the CFA program and doing the fundamental analysis. But always in the background, I was thinking, well, how do you measure this unmeasurable, the emotion? And then fast forward to 1995, I got a job as a U.S. equity analyst and worked
One of the first people that I met at that company, GWL Investment Management in Winnipeg, was a person who said, well, what do you think about technical analysis? And I didn't know anything about technical analysis. And I had the opportunity from there to do a little bit of work with Bill O'Neill's group and the Maroon Big Giant Books group.
And really learned that along with my CFA, looking at the charts was an excellent way to bring everything all together from the emotional to the management to the fundamentals. And I started doing my CMT charter there.
And I did a couple of levels. And I think around that time, you needed to do a paper to get level three. And I was like, ooh, I'm not smart enough to do that. But when they allowed us to do the test, I did move forward and got my designation there.
And I think, you know, as an investor, I'm really not a trader at all. I look at long-term charts a lot more than I look at short-term charts, that having my CFA charter and my CMT charter, it
helps me to really put things in perspective and to make some money. Because I think if you just have one, your CFA, you can analyze and pick a name and be right for a long time before you make money. And so that's how it all came together. So I've been in leadership. I've been on buy side.
I've been on the institutional side and I really have found my sweet spot now in the private client world. I am very passionate about educating people and helping them make their next best decision with their investments. And that includes having a discipline. So with the CFA and the CMT together, I think I can give a perspective that's unique and can help people be grounded in their decision making.
And Janine, you had gone through a couple levels of the CMT program in the late 1990s, the charter in 2001. Did that impact some of the decisions you were making at the frothy end of the tech bubble? For sure, for sure. So when you're looking at the charts and they seem to be going up for no apparent reason, you either think that...
you're so far behind that you're in first because no one else is around you. And what am I missing? Um, or you, you're not, you know, that, or there's something very strange happening. And so looking at the RSI and looking at the volume, you can really kind of see what the conviction is in the moves. And, um,
That just gives you perspective. So I can tell you that in 1999, running U.S. equities and getting yelled at daily for not owning Nortel because it was, you know, not only was it a big part of the Canadian index, but also the U.S. indices at the time. Yeah.
You know, we didn't need to own it, but we were getting a bad report card every day from the market for not owning it until it turned around. What were your reasons back then for not owning it? Well, so I worked at a company that we ran Canadian as well as U.S. equities. And for clients in that space, it did not make sense to own it.
on both sides of the ledger, US and Canada, because it just made it too much of an outsized wrist to have it there. And I mean, the menu is so much larger in the US. You could have owned Cisco, Lucent. You know, the list is long compared to what you might find in the Canadian market that really doesn't have very many names, especially in the technology. That hasn't changed over time. Is there any...
Standout technology name in Canada today? I know there's Constellation Software, but... Yeah, well, I mean, we have our friends at Shopify. Oh, of course, yeah, Shopify. They're in the mix. And we've got some pretty famous stories in Canada with...
Research and Motion and then BlackBerry and Nortel. So we do a lot of great things in Canada, but technology, we seem to have fabulous ideas, but they don't last long. And when you were managing in 99, how far after the peak in 99 did you manage money?
Well, so in portfolios was from 95 through 2000 were the institutional days. So super interesting period. Yeah. So you learned a lot about what were some of the big lessons that you learned during 99 that maybe you were able to apply later in the future and some of the things that some of the traps and whatnot that you maybe learned.
Well, volume and RSI are the two things that have really become a part of my discipline. And that has stuck with me forever. You know, every Saturday morning when I when I look at my charts, my long term charts, you know, those are the things that I'm looking for change. And, you know, change is where you make money. Change is, you know, change is is.
When you say long term, are you thinking weekly and monthly or going out to quarterly candles? Well, I do look at the monthly charts. And I look back, I look at the 20-year charts first and come in to focus if something is interesting. If it's not interesting, fine.
I move on. And so if you look at a 20-year chart and in that 20-year history of the company, it hasn't necessarily generated any alpha or profit for investors over that time period. We would assume it's because the fundamentals are bad.
When you're looking for change, what magnitude or degree of change would you need to see on a monthly chart to say, okay, finally, this company's got something going on fundamentally? Because you can get a lot of head fakes and really bad charts, those long-term bad charts. For sure. For sure. So we're looking for – I'm looking for violated trend lines. Yeah. So you want trend change. I want trend change. Yeah. I want trend change. And that's where things can get interesting. Yeah.
I'm never going to get in at the top. I'm never going to get in at the bottom. But if I can get that 80% in between, I am super happy. Yeah, exactly. And so most of your portfolio selection, is it stocks or do you do funds as well? Yeah.
So I started out as a stock picker. Right. And I still do some of that, but I really try to help my clients keep most of the money for them. And so I use quite a few ETFs now. They're really, you know, they're very useful and a good way to get into markets or sectors.
Without having to look for liquidity or even think about staying for a long time if that's what's needed at the moment for clients. Mm-hmm.
So you're looking at different thematic ETFs and sector ETFs and that kind of thing? For sure, yeah. And when you say RSI, you mean Relative Strength Index or do you mean Relative Strength Performance? Relative Strength Index. Right, so do you look at momentum and relative performance as well? Sure, oh yeah, sure. It's farther down the list. Yeah, interesting. But really those components in conjunction with the fundamentals and the macro backdrop
have really helped me to hone my discipline and to be able to explain the markets to regular people. Because that's the thing that I want people to be able to do. I don't want them to think of the market as a black box. I don't want them to
really look at the financial news and get nervous every day. So, yeah, so important. I can't let the earlier comments slip without drilling down on it. But you mentioned that you worked with William O'Neill's group.
Can you elaborate on that? That's pretty interesting. It is very interesting. Very early in my career, in '95, I went to LA for a week and went to their offices and sat in a room and
looked at the books and, um, I did have a chance to meet, you know, for a few minutes with Bill, but, you know, was spent the most time with, with my coverage at that, at that time. And, um, you know, I had homework every night of, you know, look through the books and draw the lines and, and, uh, and, and all of that. And, and it, um,
We talked a lot about the head fakes that you're talking about because that's the difference in the making money part of it. And really, that's carried through. So very fond memories of that week in L.A. And coming in, really, because at that time I was a level three candidate for the CFA.
And I just started this job and, you know, I thought I was so smart because I, you know, and, you know, humbling as well as empowering. Yeah. You know, one of the things Tyler and I really are focused on with this, with this podcast, in fact, it's called fill the gap for this very reason that we're trying to help in particular, we're trying to help fundamentally minded investors to appreciate how they can really lean on these technical tools and help them, you
balance out their decision-making and perhaps maybe listen to the market a bit more because it's, as we would like to say, the best fundamental analysts on the planet. So why not listen to it? So can you, in investing, there's basically, there's the growth of the company, there's the momentum of the stock or the technicals of the stock, and then there's the valuation of the company. Can you maybe talk to those three things and how you intersect those three when you're picking stocks or ETFs for your clients?
So I would say it's one third, one third, one third. And the reason I say that is because, um, fundamentals of a company can be fabulous. Um, but if, um, there's something in the background, whether it's leadership or, uh, or a total addressable market, um,
the technical part of it will make you check to see if you're right. And just like you said, the price tells you every day. The price action tells you exactly what's happening in the markets every day or that name every day or that sector. And so having this extra tool in my toolkit
um allows me to not see into the future but just give me pause uh of whether i need to increase my waiting decrease my waiting um and uh or initiate or even exit um
The markets, you know, I count myself as being very fortunate. I get to read for a living and make money from it for myself and for my clients. There aren't a lot of jobs out there that you can do that. And really, if you can help a few more people along the way to think about the markets like this, you're going to be able to be a really good investor.
And, and that's really what I would like to be is to be known as a good investor. And it's it and one with clarity and one with overall confidence and having the ability to do all the math. And it's so much easier to do the math. Now the tools are so much better than when we all started in this business.
And that generation of alpha often comes from the behavioral side of things, because there are machines and people that do the fundamental analysis so much better than we could have done it in the past. So that's the edge. And humans, unfortunately, we are not fast evolvers.
And even though we know we have discipline, we know that markets are generally up and to the right, when there's that big news story or that shiny thing, we can't help ourselves. We want to chase it. We want to dump it. We want to do all of those things. But having this discipline to be able to come back to look at the RSI, look at the fundamentals, look at the long-term perspective,
it helps you to be a better investor. You know, as we're recording this interview midday, June 12th, there are thousands of people all over the world sitting for CMT exams. And particularly those at level two and level three, the candidates are forced to synthesize multiple technical tools. So level one is a lot of recognition and definition. But you mentioned your process changing from simply looking at
trend violation to adding a momentum component and a volume confirmation. And I think what's challenging for a lot of people,
fundamental investors might pull up the chart and just see if it's above or below a long-term moving average. So they've got an idea of trend as maybe a double check on their fundamentals. But there's more to your process. And there's science, there's math behind how any indicator is created, how the data is assembled from the markets.
But the art part of identifying trend change that's also on a strong momentum component and has volume,
Where do you think you got your, I guess, you know, it's the style. Jazz musicians, they can all play the same scales, but they each have a very different style of how they combine those kinds of inputs. Where do you think your mosaic came from? Well, I would love to tell you that it was very scientific and all of that stuff, but it is not scientific at all.
Once you figure out a few patterns and a few kind of setups that work for you, you become totally biased and you look for those because you know that they've worked for you. And so that's the other part of the technical analysis world is that there are so many people doing so many different things that allow them to find
find their niche and make money for themselves and or their clients. It's fascinating. And I really learned this in the number of symposiums, the CMT symposiums that I've attended in the past, where there are so many people doing so many things that I never even thought of.
And it becomes this incredible mosaic of knowing what's out there, knowing what's available, and being able to access those things. If you're really not sure that something in your discipline is working, you do have another avenue to go to. And every one of those practitioners that attends those conferences are incredibly willing to share information.
And that's different. That's a different community than the fundamental community for the most part. And it's not very often that you can sit at a dinner table with legends and, you know, you just have a regular conversation with them. So that is, you know, that is a big part of that.
The success for me is just curiosity, learning, and knowing, you know, taking some notes and knowing that, you know, my simple way of making money and things that work for me. There's other ways too. And I, you know, maybe one day I'll branch out, but.
I'm not very branched out. That's been powerful self-awareness. I appreciate an honest answer. Thank you, Janine. And the fact that you're aware that there are biases built into your process, that's step one, right? And then seeking out other things that might challenge the idea is step two. That's great. And one of the comments you made in one of your recent blog posts, you make this reference to portfolio resilience, right?
And that it's such a crucial concept for investors to understand. So can you talk about that a little bit as well?
Yeah, so portfolio resilience, you need to be diversified and you need to be really in a situation where you go up almost as much as the market does when the market goes up, but not nearly go down as much as the market goes down when the market does go down. And those drawdowns are the things that scare people the most.
And and having the discipline and having a good resilience in your portfolio. And that means, you know, diversification, high quality names for me and how I build portfolios that it allows you to weather the storm and get to whatever your wealth finish line is.
And really, you know, that's what the market is asking for. That's what consumers are asking for today is make me a path that's going to fit everything that I need for my life. And, you know, we can't really...
And you have to be able to do that within a portfolio makeup and whether your retirement accounts look a little bit different than your non-registered accounts. You've got to have that resilience in there to help people get the cash flow they need when they need it. Because relative performance, no one can eat that.
And it's cashflow that people crave. And that is a part of your resilient portfolio. Yeah, and it sounds like...
being mindful to build a portfolio in a way that grows wealth over time, but also preserves it during those difficult periods is important, not just obviously to have limited capital drawdowns, but also for the mental aspect of it, because it makes it a much more executable plan if it's not such a mental challenge and it's not so trying during bear markets. Is that fair?
Yeah, for sure. And one of, I can think of one instance where I attended a symposium and I want to say it's probably three, two years ago, maybe a little bit longer than that, probably four years ago or so, that we're spending a lot of time at that conference on long-term interest rates.
And those long-term interest rates, things are changing. And I don't know why. Nobody knows why. But it really helped me to stay out of trouble. And looking at those long-term charts and hearing people like Louise Yamada talking about that. And you don't always need to know why, but you have to pay attention to the signals.
You know, you mentioned something earlier, too, about looking into the future or having a lens into the future and that you don't have that. And I think that's an important point to make because the impression is and I wouldn't deny this, but the impression certainly is that the so much of investing is assessing the future and kind of making judgments about the future and building your portfolio accordingly. But what I've always thought technical analysis does for you is it gives you a view into the present.
And I think that's the most underappreciated part of how technicals can help in the sense that I have all these views about the future based on what I think about management, all those road trips I've done to conferences and everything else and traveling to Washington to learn about policy and everything else. And so now I have my views and that's wonderful. And what Tyler and I always try to say is that, you know, you can spend all this time doing this fun amount of work, but you're not going to make any money unless the market agrees with you vis-a-vis price trending. And that's the present.
And so that's always what I thought, what the value of technicals was, was bringing you all that, that tendency to look into the future, to make decisions, bring your mind back to the present before you make any decisions, because does the market agree with me right now is the most important question. If you're trying to tie these things together. And so is that how you think about using technicals as well in terms of. Well, for sure. And, and so when, you know, when you say you're bringing things back to the present, um,
We've had a resurgence of the Roaring Kitty. And all of us can look at the fundamentals of that particular name and can go...
Why, you know, it's just like, why, why are you going to get involved? And it's, I'm happy to be a bystander. I'm not getting involved because, you know, even if it's $5,000 of capital, it's gambling. It's not investing. And, and for the most part, we're paid professionals to be investors, right?
Or at least that's the part of the market that I'm in. I'm not in the speculation business. I'm just not there. But that's coming back to the present all the time is so important for technology. We've just had a drawdown on many of the AI names in the market. And it brings me back to 1999.
The internet is taking over the world, you know, like get on board, you know, and will AI help us? Absolutely. But I don't know that any of us can pick out the correct name that's going to get us to the finish line right now. So you really have to have the perspective of the fundamentals and the technicals.
to be able to keep yourself out of trouble, have that portfolio resilience, because you need to be there, but you don't need to be 10 times market weight there at the moment. Yeah, I think the actual challenge, one of the biggest challenges is that you actually do have the right company.
And the perfect example, and Janine, you lived through this in '99 with Cisco. I mean, without Cisco, the internet did not happen. And all that excitement and knowledge about the future is the reason the stock traded at whatever it was, 35 times sales at the time.
The challenge was in March of 2000, when the stock peaked, with all that hope and expectation of what this company is going to deliver in the future embedded in valuation, the stock then went down 90% while revenues continued to grow and the company actually built out the internet. So it was the right company, but it was the wrong stock. And oftentimes, this is why I was asking earlier about how you weigh these things, but oftentimes the line in the sand between a great company and a bad stock is valuation.
So if everything's baked into the company at 35 times sales, it could still be the most prominent like picks and shovels type company to the theme that's driving everybody bananas in that moment. But it doesn't necessarily translate into great returns. The stock went down 90 percent. Yeah. And that's your and that, you know, that's, you know, for Cisco, we did own it.
And we probably took a 50% haircut in it before we plugged our noses and said, we can sit out the rest. If it's going to come back, and it took years for it to repair itself, the charge to repair itself.
And you're right about the valuations. And so it's the perspective all the time. - Right, exactly. And one of the three things you look for is that perspective. You had mentioned quality when you're selecting stocks. I think that might be an interesting conversation to think about how you weave these concepts together. So you've got RSI and volume and momentum and relative performance ultimately, trend line breaks and things like that. So that's what you're looking for technically.
And if we're trying to sort of round out this more into a holistic perspective of what's a good stock pick, what do you think about fundamentally? How do you define quality? Maybe how do you, what's valuation to you? So I am a big believer in cashflow and cashflow balance sheets,
being a elephant in your market and having a very almost capital light business model. So one name that comes to mind is Visa. And, you know, a really interesting story, you know,
great evolution? Does it have problems with competition, etc.? Yep. And it's part of its
its success is that it's been able to carve out that niche. But the incredible cash flow, incredible capital structure, another name that is very good on the fundamentals but doesn't always perform like we want it to is Costco.
another very fabulous company, but there are times that you wanted to own this thing and times that you don't want to own it. And so when I bring up that chart, I might just have just a quick look at it 'cause I haven't looked at it too much lately.
Pretty, pretty extended at the moment. But, you know, those are kinds of companies that I really like. And, you know, and it's I don't know if I like it as much as Charlie Munger liked it. But but, you know, definitely those are our kinds of companies. Like when you look at the Costco chart,
you might not say, oh, that's a normal retailer chart. Right. It's not. Exactly. So something different going on. So something very, very different. So cash flow balance sheets management, those are, you know, those are the things that I look for in the fundamentals. And then, you know, really when it comes to entry and exit points, I'm looking for change.
You know, if I read about something and look at the chart and nothing's happening, I either know that, number one, I'm wrong or I'm way early. Yeah, right. And that happens in our business all the time. We are very lucky. We get to hear and see things that the regular investing public doesn't see as early as they
I mean, I think I saw Amazon at a conference in 1994, right before their IPO. Not impressive. So, you know, that presentation, not impressive. Yahoo was at the same conference. Very impressive. But, you know, these are things like we get to see this stuff early and you have to pay attention and there will be a chance that you'll be able to make money on it.
But you have to sometimes wait for that. And that can be very difficult to do in our business because everybody wants to be right all the time.
Be right and be right all the time. And your clients are looking at their quarterly statement. So I'm going to borrow a point that Dave has made time and time again. If we're talking about the chart of Visa, awesome trend off the lows in 2011. And what a great company to own. But on the daily chart over the last quarter, awesome.
Really sloppy, choppy, messy, not something you'd want to own. And the entire period from the peaks in 21 through the beginning of 2024, that didn't add a lot of alpha to clients' portfolios. So my question to you, Janine, is on multiple timeframes, right? If your clients are coming to you and saying, hey, this quarter, some of my holdings are down a few percent.
How do you reorient them to a longer-term investment horizon? What are the kinds of communication tools you use? And the other part of the question is,
Are there periods where either because of relative underperformance or on an absolute basis, a stock is simply drifting? Do you sell out of those positions? Not because it's a particular risk. It's not in a strong drawdown, but it's not adding to the portfolio. How do you prioritize what goes in and communicating that to clients? One of my early mentors in this business was,
told me that I'm never going to get fired for taking profits. And so when I look at a name like Visa, for example, it's had, you know, it's, it, it trades in a very defined channel. And I don't know, something really crazy would have to happen for me to,
totally sell out of that name. But there are times when I'm overweighted and there are times that I'm underweighted. And so having these defined channels allows me to take profits at the top and reinvest at the bottom. And so when I talk to clients about, about this, I talk to them about recycling the money and within a portfolio of
We have enough sectors. We have enough names that they, you know, they're not all on the same trajectory all the time. So there's always places for me to rebalance, to make some money, get some more dividends, you know, generate the cash flow.
And that is the, you know, that, uh, that being active in that area really shows up in down markets because I'm able to show very easily that, uh, you know, even though the value of your portfolio is down, your cashflow has not changed and we are carrying on toward the long-term goals. And, you know, this is, um,
You know, this is one of the things that I talk to clients about a lot is that your discipline and you being in charge of your money is really important. And being able to show them, you know, how I'm generating more cash flow for them and generating more wealth is
empowers them to actually do a bit more and to pass it on. Because I mean, if you're not in charge of your money, you're not in charge of anything. That's a quotable quote right there. That is right there. And Janine, I feel like the truth just came out. You sold yourself short earlier by saying that you're not a trader. I understand trading in the lens of Roaring Kitty and highly speculative, but that's a very responsible active manager approach.
to rebalancing, taking position sizing very, very in a rigorous way to trade around positions makes perfect sense. Yeah. I mean, the Canadian banks, for example, they are the backbone of every Canadian's investment portfolio because it's an oligopoly. The dividends have never gone down in my lifetime, but
the price of the stock sure have. And with the backup and interest rates over the last couple of years and the size of the mortgage portfolios for each of them, their charts look terrible. But I don't mind getting paid to wait.
And so in instances where, you know, I'm taking some profits in technology because the NASDAQ has gone up so much since October of last year, I don't mind putting that money into Canadian banks to be able to, that I already have positions in, but maybe I'm going to be overweight, to gather up some dividends while, you know, while I'm waiting. Yeah.
in the in the important distinction i think that you would agree with based on what you've said so far is that you know yes the charts look quote unquote terrible uh if you look at the daily chart but if you just step back and look at the monthly chart as i like to say you know a daily a bear market on the daily chart is an oversold uptrend on the monthly chart and if you're really trying to intersect fundamentals with technicals this is
This is how you do it, right? You have to look at charts that are driven by the fundamentals you care about, and daily charts are not driven by that. So what you... Perhaps what you see in the daily chart is people freaking out about the fundamentals or getting bored with them or finding maybe a shiny object to chase instead. But in the interim, the long-term trend, which is driven by fundamentals, is still fine. Is that right? Yeah, that's exactly right. Yeah. So...
What else? So when you are trying to balance between technical and fundamental, let's say you have a company that checks all the boxes for you fundamentally. But when you look at that monthly chart, you don't have the volume, you don't have the RSI, you don't have the trend change inflections and things like that. What do you do in that instance? Do you wait until the market agrees with you or do you make it smaller or do you go in anyway just knowing you might be wrong? Yeah.
Well, it gets onto my watch list. Okay. And, you know, and I have a look at the, you know, at the chart, mark it up and pick my spots. Right. You know, if we have a weird day and it gets close to my buy point and nothing else has happened, you know, to change my mind, then I start picking away at it.
I can be patient because my time horizon is pretty long. I'm not trading every day. So to be able to bring in a new name or exit a name,
I, I need to be, um, you know, clear ahead of time in the discipline of, of what I'm going to do with that. And so when you say change is, is an important part of what you're looking for, it sounds like trend change itself is at the top of the list, right? Yeah. It's not just, not just your change of your fundamental view, but the change in the trend itself to, to acknowledge that the market agrees with you. So, you know, I mean, Visa is a good, a good example. You know, if I, if, if,
if I just landed on the planet and just started to do the analysis on this name, um, you know, it's expensive, uh, and, and, um, you know, but it's not, it's not going on to new highs. Um, you know,
Would I initiate today? Maybe not. You can tell from the chart, it has moments where good entry points have been presented. And you just need to be ready on that day. And that's where technology in our business becomes so fabulous. Because
All of that can be programmed in for, you know, for you to get, you know, 700 alerts popping up on your screen. Today's the day. And it really behooves all of us to embrace technology as much as we possibly can, because it just makes it makes us better. Anybody can manage money for clients in an up market. It's in the down markets that you're actually valuable.
You know, you've got to keep people in. You've got to calm them down. You've got to do all of that. And having technology on your side to help you do all those things is just terrific. Yeah, don't fear the technology as most people. That's the inclination is to just be intimidated by it. But in actuality, it actually can make life quite simple. But I think an important observation you made about the valuation of Visa, like we don't
You know, time it's always time will tell if something's expensive or not, but that stock's been expensive for a very long time. And actually, I'm just looking at the monthly chart. The relative performance on Visa actually peaked in early 2020. So it's been underperforming for four years. So as good as the chart looks, what we're where technical analysis can really help draw the lines in the sand and help us see things more clearly is
is this is the difference between a great company and a not so great stock. And it almost always is because of valuation. Valuation becomes, it can be a headwind or a tailwind. And to know it ahead of time, what it might stand to provide for you in a portfolio,
can help you make decisions as well. Like this is a very expensive stock and it's, the chart looks fine, but the, like the monthly chart, but the relative performance has been down for four years. Yeah. Good company. And Dave, you're looking at. Also great stock. You're looking at Visa relative to the benchmark S&P 500. That's right. Yeah. Yep. Yep. Yeah. Janine, you had mentioned Shopify. So that, I'm curious when you, when you're, yeah,
When you're looking at the fundamental side, would you rather have a slow growing, like when I say slow growing, like somewhere along the lines of the economy growth type of growth, like 5% to 10% something top line growth, it's not super robust, but generates a higher return on capital.
But would you rather have something like Shopify that's got an explosive top-line growth? It's just barely generating free cash flow, but it potentially has a trend change coming that could unleash. It could be the next Amazon. That's the perception, right? That's looking into the future type of stuff that we do. So which one would you rather do? Which kind of stock would you rather buy? Well, I think in the portfolio context, yes.
every portfolio needs to have a little bit of sex appeal because you can't just be all boring all the time. So there has to be a component of the future. And, you know, you just have to measure the risk capital within the portfolio to be able to build that in. So, you know, I mean, Shopify is probably one of the most controversial names that we have because, you know,
Amazon could kill them if they wanted to. But they're innovators. And they've come up with some really interesting ways to help entrepreneurs. They've come up with some really interesting ways to access markets and to make it easy for regular consumers like you and me to be able to shop. So I don't count them out.
but they do have a difficult competitor to deal with. I look at their chart and it's come a long way, but
It's not a triple weight in the portfolio. It's not a 5% position. But your point is that you like the idea of having diversification. Yes. Not just amongst sectors and maybe even not just amongst asset classes, but also different types of company profiles at the different stages of growth of their life cycle. Yeah, for sure. Because you really... We have to look to the future. We have to look to innovators. But...
putting them into the portfolio and really having conviction with them it within a context of an overall portfolio um you're not going to outsize that um but you're not going to totally like minimize it either because if you know
50 basis point position that doubles, who cares? You know, you have to have a meaningful, a meaningful bet in the portfolio, but you don't want to make that so oversized that it, it, it gives you a portfolio advantage.
you know, unreasonable volatility. So maybe it might be helpful to also learn a little bit about how you do think about position sizing. Is it like conviction weighting or is it some combination of fundamentals and technicals? Or how do you think about it? My portfolios are fairly concentrated, you know, 20 to 25 names. And so it's, you know, so I want to make sure that that
you know, I know the fundamentals in them and that whenever I'm, you know, if something goes up by 20%, it makes a difference. Yeah. You know, so, but it also means that you have to be pretty, you know, you have to be very diligent about your, about taking profits where it makes sense. Yeah. So you're not, you're not doing, I'm not,
You're not taking, let's say it's 25 positions. You're not doing 4% in each one because you're also recognizing the difference in volatility. So you're somewhat volatility adjusting them, but in essence, it's a concentrated portfolio, maybe volatility adjusted. Yes. Yeah.
There's something that came out of the last three comments that I want all of our listeners to jot down in their notebooks. There's a lot of chatter right now about diversification is a shield for the ignorant. And, you know, it's for people who don't know what they're doing. You just kind of buy everything and passive indexing might fall into that bucket.
The distinction that you made, Janine, was you run concentrated portfolios, meaning you're looking for those single security items or ETFs that are outperforming and trending, but that they are from different areas of the economy and different sectors of the market so that you have uncorrelated returns from the holdings in your portfolio. Right.
And I feel like there are endless battles going on X or LinkedIn or wherever about, yeah, diversification is terrible. No, diversification is critical. And I think all those arguments are solved by simply articulating clearly diversified, concentrated portfolios. Well, yeah. I mean –
again, I'm going back to my biases, things that work for me, things that work for my clients, things that I can explain to people easily, and that it's not too much work for me to spend time on the portfolios. Because don't forget, I have
distinct roles. I'm building portfolios for people, but I'm also spending the majority of my time speaking to clients. And so those have to be balanced within a practice as well.
You just teed up the last section that I know Dave and I are dying to talk about. It's like you're reading my mind, Janine. That's what I'm supposed to be doing as a good PM. I was just going to say, you're a fiduciary and, you know, precognizant.
So when it comes to communicating this to clients, and in this last section of the interview, I'd love to hear what that process looks like. How much do you share with them from your fundamental lens versus bringing up a chart of their returns or of holdings in their portfolio? Do you explain to them your process and in what ways do you do so? So a long time ago, my mom said to me,
what do you do anyway? It sounds very fancy. It sounds very complicated. What am I supposed to tell my friends? Because it looks like you're doing pretty well with whatever you're doing. And so I, I had to, you know, my mom was a chemical engineer by trade, but you know, that was her business. But I said, okay, everything that you taught me about
the shopping for in the Safeway flyer, I do the same thing except my flyer is the New York stock exchange. And, uh, and so just like you're looking at the flyer every week, I'm looking at the price tables and, and, uh,
And so I said, that's, and then when, when online shopping started, I said, I guess I'm kind of like the, the original online shopper, you know, cause that's how we shop for things in the New York stock. Yeah. And so that has really helped me to explain to people what I do. And, uh, you know, like you never want to be the person who buys toilet paper at seven 11, because, you know, you're paying too much.
And so that's how I explained it to people of what I do and how I build portfolios. And you don't want to fill up your car at Costco with toilet paper just because it's a good price. And that's how you're going to build your portfolio, just like you build your shopping cart for the monthly supplies. So
I do talk to people about my process. I do talk to them about when I'm taking profits and when I'm adding to names. I also talk to them about the cash flow that their portfolios are generating so that they can...
make their next best decision in whatever they're doing, whether they're retirement or planning for a big purchase or what have you. Behaviorally, we are not very good at switching from saving to spending. And when people don't really understand that all the work that they've done all their lives, they're now allowed to spend.
it is a really different switch to turn on for people. So by providing people with their cash flow, it shows them kind of what their portfolio paycheck is. And so when people can understand what that paycheck looks like, then it helps them to understand
feel okay about what they're doing in retirement or transitioning from work to retirement. Because there are a lot of people who are so afraid to stop working because they're worried about their cash flow, they're worried about the paycheck, they're worried about all those things. So if I can tell people you can take...
two more holidays in a year or go out and buy that car or whatever. That's a big part of the communication process. And then for, you know, for talking to new clients, I really focus on getting to know them and getting to know the whys of their money because money is a bit boring unless you have something to do with it. And, you know, so if I can figure out their why and,
then I can actually be useful to them. That's so wonderful. I know. I'm rethinking what line of work I want to be in, Dave. Actually, I'm about to ask you for a business card. Okay.
So Sir John Templeton talks about the emotional phases of markets. Bull markets are born on pessimism and they die on total euphoria. Do you have a go-to set of tools for talking with clients? Maybe not in the most macro sense, right? The cliff that we fell off of at the beginning of the pandemic or great financial crisis, but maybe even more micro level.
A standardized drawdown that we had in 2022. How do you talk to clients about phases of the market and how they should be reacting responsibly? Well, you know, it all starts with no one can predict what the markets are doing. If we could, we wouldn't need to work. And I tell them every year we have two or three drawdowns, somewhere between five and 10%.
Those are good buying opportunity days, but those are really always the days that I make a call. And I call people on down days. I don't call people on up days because I know that it's on their minds. And I mean, I don't care who, you know, how much discipline people have. Those days in the pandemic where the market was going down, you know, in a free fall day after day,
It didn't matter how much discipline I had. I had to walk around the block a few times because it was bad emotionally. And I've been doing this for a long time. I should know better. But it was hard. And so those are, you know, those are things that I try to get people prepared for is that you're going to feel awful. And it's and on those really awful days, those are actually the days that you should be doing something. Yeah.
So that's, it's not scientific. Everybody's different. Every client is different. And, and some times the people that you think are the most resilient to risk are
Mm-hmm. Mm-hmm.
So same question, but with the caveat that there's a major trend underway of wealth transfer from husbands to wives as wives are outliving husbands. And has your client makeup, the demographics of the clients with your firm changed a lot? And if so, has anything changed in how you manage their expectations and
of them being investors with you? Just going back to the pandemic, the pandemic was the best thing ever that could have happened for having everyone in the family involved in a wealth discussion. Historically, I would meet with
whoever was the minister of finance in the family sometimes it's the man sometimes it's the woman and i would not meet the other person because just as with every family all uh all tasks are divide and conquer you know you drop off the kids you pick up the kids you know you do this you do that and finance happens to be one of those things and having the pandemic where everybody was on zoom um
even if somebody was walking in the background, they heard what was going on. And if you're able to explain things in a rational manner that's not too difficult to understand, you can get people involved. And so from that perspective, it has actually increased a lot better. You know, I hate to say it, but
TikTok has been marvelous for getting people involved in, you know, there's all kinds of advice out there. Some of it's good, some of it's bad, but just, you know, giving some sunshine to our business is a good thing. It doesn't have to be, you know, everything dark and mysterious and all of that stuff. So the transfer process,
You know, we've been talking about the great transfer of wealth for many years now, in my experience.
people hang on to money a lot longer than you think they're going to. They're not as democratic as you might imagine. Maybe tax regimes will change. That will make it easier to do that. I know in Canada, we have free gifting. There's no tax on gifts anymore.
So we are seeing some of that happen. What I'm seeing more of is that families are offering their children professional money management much earlier in their lives than they were afforded. And so that gives an opportunity to our business to be able to...
help younger people get a discipline earlier on. And, you know, and just having more people in the family involved talking about money is a good thing. People that, families that don't talk about money
generally have lots of problems. And sometimes people don't talk about money because they have too much or that they feel like they don't have enough. But just being able to have a good conversation, even once a year,
I have a habit of talking about finances for five minutes on my anniversary day with my husband, who is not the minister of finance in our family. And just like where we've been, where we are today.
What are our financial projects for this year? Like what big trips are we going to do? We have a big spend, you know, all of that kind of stuff. And if I can do that five minutes on our anniversary,
It's good. He's captive. You're captive. You know, he can't get run away from me on that day. But, but those, you know, why not make it a, make it that conversation just so that you are talking about money within your family, because it will help with that transition when, and if it does happen and it'll, it will allow you to articulate what your wishes are, because lots of times people, you know,
You know, they want to do certain kind of things with their money, but they never told anybody about it. Right. Mismanaged expectations. You know, this is a big part of it. But, you know, I would say that more than half of the clients that I work with, the woman is the minister of finance in the family. And, you know, we do laugh about it a little bit that we're the grumpy old ladies of finance.
of of wealth and we're kind of at a certain age that we can say things that we might not have said in our 20s and 30s and people listen and so um i'm very grateful for the clients that i have and and uh very grateful for the opportunity to help to educate them and their families um so that uh they can get a way better start than some of us in our generation have even had
Well said. Well said, Janine. As always, every episode of Fill the Gap is full of key takeaways and some evergreen lessons for all of us. And really appreciate you taking the time to spend with Dave and I this afternoon. Looking forward to seeing you at every CMT symposium and summit and conference going forward. But thank you very much for your time today. And we will see you again really soon.
My pleasure. Thank you very much. Thanks so much, Janine. Fill the Gap is brought to you with support from Optima. In addition to candidate study of the official CMT curriculum, Optima provides a full video course on all of the material that candidates need to know for each level of the CMT exams. Each course is broken up into modules ranging from 15 to 45 minutes, depending on the complexity and length of the topics being covered. Learn more at Optima.com.
Bye.