Brief Mid-Year Update On 2018 Global Asset Allocation

by: Claudio Brocado

This brief update is meant to be read along with a review of my extensive December 28, 2017 note for many more details.

While 2018 has indeed turned out to be a challenging year for many investors (I am as humbled as any), nothing has happened so far to change my long-term outlook.

I remain committed to my long-term thoughts as explained in my December 28, 2017 Seeking Alpha article.

I would (tactically) add to biotech exposure (please see below for some of my favorite long-term picks.

Goldremains the best store of long-term, real value, and has been extremely stablein euro terms. I increasingly like Agnico Eagle Mines (AEM) and RandgoldResources (GOLD), but only for those with a bullish gold outlook.

Time does fly, and today yet another World Cup starts, this time in Russia. Yesterday brought the somewhat ironic, yet overall positive (from my standpoint) news that the 2026 tournament will be hosted by the NAFTA countries of Canada, the US and Mexico. 2018 is almost half over, so it seems like a good point in time to provide a brief update on my 2018 investment strategy.

As I have noted countless times, it is probably not a good idea to put together a list of yearly investment ideas, particularly since my actual stock investment horizon is always no less than five years. However, given that I did provide a 2018 top pick list, I feel a duty to write at least this short mid-year update.

I am by no means pleased with my recommendations to-date, yet I remain fully committed to my ideas for the long haul. Emerging markets have been under pressure of late, and the German stock market, led by my preferred auto-related stocks, continues to disappoint. That said, gold (on which I have been writing more extensively than ever in the last few months, though I admittedly remain no expert) has remained extraordinarily stable in terms of euro, and is almost exactly at what originally was my fair value assessment of US$1,300/troy ounce.

The yellow metal continues to demonstrate its ability to be a store of long-term real value (contrary to cryptocurrencies, which were deemed to be represent a serious challenge). My new fair value range for gold has for a few weeks been in euros (1,050 to 1,130 euro/oz).

As I already mentioned, I stand by all my recommendations for the long term. Beyond emerging markets, an area of meaningful disappointment so far in 2018 has been biotech stocks. In my yearly picks musings I wrote: "I would also have biotech exposure, at least through Gilead (NASDAQ:GILD) and Amgen (NASDAQ:AMGN)."

As a contrarian long-term, value-biased investor, I would add to biotech exposure at this junction. For most readers, a biotech exchange-traded fund (ETF) or good low-cost mutual fund invested in the sector may be the way to go. As far as additional individual names, I also like Regeneron (NASDAQ:REGN), Biogen (NASDAQ:BIIB), Celgene (NASDAQ:CELG), and Vertex Pharmaceuticals (NASDAQ:VRTX), among others for the long haul.

I stick to everything I have written on gold in the last few months. As far as individual gold mining stocks, I increasingly like Agnico Eagle Mines (NYSE:AEM) and Randgold Resources (NASDAQ:GOLD). Again, the yellow metal itself is the ultimate store of long-term, inflation-adjusted, value.

Gold is an ideal element to protect wealth (not to create it), so I view it as a long-term substitute for cash and/or insurance protection against losses in the purchasing power of cash. Gold mining stocks (particularly individual equities, but also such ETFs as GDX and GDXJ) are leveraged ways to invest in the yellow metal, and I deem them suitable only for those investors who have a bullish outlook on gold beyond its ability to protect wealth.

Disclosure: I am/we are long AEM, GOLD, AMGN, GILD, BIIB, CELG, REGN, VRTX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.