With stock markets, the experience is all about expecting the unexpected and that was certainly the case in 2020.
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By Michael KovacsPresident & CEO |
A great start to the year and then a month retreat between February 19 and March 23, 2020 that knocked approximately 35% off the value of global equities. Since then, a sustained rebound that has pushed the MSCI World Index to a 16.53% year-over year gain as at the 2020 year-end.[1] Not many would have expected that.
For the Oakville, Ontario-based Harvest Portfolios Group Inc., 2020 was a year which showed the value of their conservative growth and income philosophy. In a Q&A, founder, President and CEO Michael Kovacs reviewed the year, the impact of the COVID-19 pandemic. He also discussed Harvest’s top performing ETFs and talked about how the company’s thinking helped it keep the pandemic in perspective.
What surprises did the year hold?
MK: The biggest obviously was the pandemic. The second biggest was the response and speed at which vaccines have been developed. It has been unbelievable really. The effort of different organizations; everyone pulling together. It is quite a thing and it has helped generate the optimism we see in the markets.
What kind of year has it been for Harvest?
MK: Our Exchange Traded Funds (ETFs) moved with the market and have bounced back nicely. Throughout we were comfortable with what we held. We focus on large cap businesses and they have survival power. So, we never looked at our portfolios and said: “We shouldn’t hold that.” That’s because they are all great companies.
Which funds did best?
MK: Our top performer was our Blockchain Technologies ETF (TSX:HBLK) which is up 149.81% for the 2020 year[2]. We launched this ETF early in 2018 and designed it to participate in the technology over time. The Blockchain is a developing transactional digital technology, and because it is fairly recent, we designed the index to initially hold 55% in emerging blockchain companies and 45% in large cap technology companies. The thinking is that as the technology matures, it transitions to a much more focused, pure blockchain ETF.
The large companies have benefitted from the general run up in high tech stocks. Many of them offer IT consulting such as IBM and Accenture and services related to blockchain applications. In the emerging area there are miners and fin tech companies.
Your Gold ETF was the second-best performer?
MK: Yes, the Harvest Global Gold Giants Index ETF (TSX:HGGG) also did well. It is up 29.04% for the 2020 year.[3] HGGG is an equally weighted portfolio of the world’s largest gold companies and tracks the Solactive Gold Giants Index.
We’re solidly behind the gold story. Globally, there are record amounts of debt which are getting bigger because of pandemic relief efforts. We haven’t seen debt as this level as a percentage of GDP since the Second World War.
As these levels get higher, they weaken currency values which pushes the price of gold up. So, we want to own the largest miners, they are profitable today and experience margin expansion as gold moves higher.
Third is your core technology fund?
MK: Yes, that’s right. The Harvest Tech Achievers Growth & Income ETF (TSX:HTA) is up 29.59% in 2020.[4] It is an equally weighted portfolio of 20 large-cap companies that is diversified across the sub sectors. It is designed to provide a consistent income as well as an opportunity for growth. We enhance the monthly income with our covered call strategy.
This year’s gains were directly related to the increase in technology use during the pandemic as more people worked from home. This enabled the companies to expand their services and global footprint.
What is your outlook for 2021?
MK: We’re very positive. The markets will move back and forth, but we think as the vaccine penetrates the population and businesses return to normal, employment will pick up along with economic activity. We think things look much better by the third quarter of 2021.
What is the Harvest advantage?
MK: We feel we have the right kind of investments that are positioned for long term growth. We are less concerned about short term noise. We believe true wealth is created by businesses that grow and expand enabling them to pay dividends that grow as well.
What’s ahead for Harvest in 2021?
MK: We are launching two new ETFs. One is a clean energy ETF. As this area becomes a bigger focus, we see the development of a long-term trend. As with our other ETFs, we want to position ourselves with companies that will grow with the industry in the coming decades. The other is a travel and leisure ETF. We see pent up demand, but also growth coming from millennials, retirees and the emerging markets.
So, we will have lots going on in 2021.
Performance as at December 31, 2020
- HBLK 1 year 149.81% since inception 17.19%
- HGGG 1 year 29.04% since inception 26.94%
- HTA Class A 1 year 29.59%, 3year 19.60%, 5 year 19.18%, and since inception 15.5%
For more on Harvest products click here.
[1] To December 31, 2020
[2] To December 31, 2020
[3] To December 31, 2020
[4] To December 31, 2020
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 income taxes payable by any security holder that would have reduced returns. The funds are not guaranteed, their values change frequently and past performance may not be repeated. Commissions, trailing commissions for certain Harvest mutual funds and structured funds, management fees and expenses all may be associated with investments in Harvest Exchange Traded Funds, Harvest Mutual Funds and Harvest Structured Funds (managed by Harvest Portfolios Group Inc.).Please read the relevant prospectus before investing. Tax, investment and all other decisions should be made with guidance from a qualified professional.
