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4Q19 Model Portfolio Update


December 2019



Dear Client,



Summary. Overall, given our 2020 outlook for an acceleration in growth (particularly in Asia) tied to the Phase 1 trade deal, high expectations for that growth and low interest rates we continue to be weighted towards value dividend paying stocks vs growth stocks. During the 4Q19 our Growth models shifted allocations to EV (Electric Car) oriented stocks because they they not only match our Framework or assumptions for 2020, but of their value and dividend paying orientation. Further, given their relatively high (in some cases) exposure to Asia as well. In re-allocating our portfolios (mostly growth oriented ones) to the EV segment we reduced our Asian ETF exposure to compensate.


Details. Our assumptions on the EV market revolve around negative sentiment tied to falling Lithium prices & EV demand in China. We deem these as temporary tied to subsidy cuts and trade malaise. In addition, EV penetration at 2% globally of total car sales can potentially rise significantly in the coming years given the 5X increase in models being release by manufacturers, lower prices and better range & storage space as batteries shrink. Many of the positions added are tied to Lithium or Nickle which may see higher demand given they are key components to batter production for EVs.


In addition, to EV segment we added 2 Chinese telecom stocks to our portfolio given their potential lower volatility and high dividends. We did this as we reduced our China ETF exposure to potentially reduce risk.


We added significant exposure to a preferred dividend ETF which pays a relatively high dividend vs ST bonds to achieve higher overall yields across the portfolios. Lastly, towards the end of the quarter we began to increase cash levels & reduce stock exposure tied to high expectations of global growth acceleration tied to the Phase 1 trade deal.


Sincerely,


Leonard Brecken

Founder/Portfolio Manager

Brecken Capital Advisors, LLC


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