Tuesday, January 18

Cedears anti-crisis: the best options to protect yourself from the rates and the Omicron variant


At the same time, the variant Omicron Covid-19 spread to several countries in recent days, including the United States, although still without fatalities. This keeps investors alert, fearful that new sanitary restrictions will affect the recovery of many sectors of the economy.

Dalton added that to this was added an unemployment figure for November in the US “better than expected” (it fell to a minimum since February 2020) but with a “negative surprise” in the creation of private employment not related to agriculture. This combo of factors caused great volatility in financial markets, reflected in the much ado (known as the “fear index”), which hit 10-month highs last Wednesday.

When in doubt, exclude volatile assets

“This panorama creates a dilemma in regard to the choice of assets to position. On the one hand, taking the rise in interest rates represents an obstacle for growth stocks such as technology, while it favors companies of value or cyclical sectors. However, in the face of an increase in Covid-19 cases and a cooling of the real economy (in the event of confinement losses), cyclical actions will be harmed while technological ones will take advantage ”, Maximiliano Donzelli, Head of Research, warned Ámbito in invertironline IOL.

Faced with this uncertainty, the IOL Research team suggests a Cedears portfolio that replicates the performance of the SPLV ETF (which offers exposure to the 100 least volatile assets during the last year, but can only be acquired in the North American market). .

Specifically, this portfolio is made up of 30% of the papers of Pepsico (PEP), by 24% by Johnson & Johnson (JNJ), 18% by Home Depot (HD), 16% by McDonald´s and 12% for Berkshire Hathaway, the conglomerate of billionaire Warren Buffet. “To have a dimension, on Friday the 3rd when the main US indices fell on average 1%, the low volatility ETF gained 0.7% on the day,” said Donzelli.

For its part, IEB recommends a conservative portfolio made up of PepsiCo (PEP), Coca Cola (KO), Verizon (VZ), JP Morgan (JPM), Wells Fargo (WFC), AT & T (T), Starbucks (SBUX), Cisco (CSCO), Merk & Company (MRK), Walmart Inc. (WMT) y Caterpillar Inc. (CAT). “It should be noted that on average the dividend yield of these companies is above 2% and is charged in CCL dollars. The American index that mainly concentrates these types of companies is the Dow Jones ”, Dalton remarked.

In tune with the gaze of his colleagues, Gonzalo gaviña, Financial Advisor of Porfolio Personal Inversiones (PPI), warned about the importance of “being very careful in which industry the investor stops” since the Cedears are in “chess” mode.

“If the pandemic worsens, we could put a magnifying glass on the technology and communications sector, which showed its success in 2020. Also look askance at the energy sector, but avoiding all those linked to the real economy, such as tourism,” he deepened.

Cedears, the preferred instrument in the local equity market

For several months the Cedears have been monopolizing about 60% of the operations in equities in Argentina, approaching 70% in some days. The main attraction of these instruments, to the detriment of local stocks, is that they offer hedging in dollars, via price. When buying these papers in pesos, an implicit exchange rate arises with respect to the dollar value of these same assets in their country of origin.

It should be remembered that, based on the restrictions of the BCRA and the CNV to buy the CCL dollar through the most liquid bonds, the Cedears were taken as one of the references to monitor the advance of the “free” CCL price.

It is also worth noting that Investors can exchange these Cedears for their equivalent abroad on the Buenos Aires Stock Exchange, acquiring the same rights as the holders of the original share.

In the first three business days of December, within the most traded Cedears almost half posted gains and half lost. Those with the best performance were the assets of Vista (+ 5.7%), Vale (+ 4.8%), Adecoagro, (+ 3.5%), Cola Cola (+ 2.8%) and Goldman Sachs ( + 2.6%).



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