Barry Schwartz's Top Picks: May 17, 2019

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Full episode: Market Call Tonight for Friday, May 17, 2019

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Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management

Focus: North American large caps

MARKET OUTLOOK

Relative to history, investors are overweight cash and underweight equities. What we are seeing is a slow expanding North American economy with a strong consumer and near full employment. Fears of a recession or a prolonged bear market have been with us since we came out of the great financial crisis. Our approach has been steadfast. We determine which asset class has the best upside, find the greatest companies in that asset class and then adjust when needed. With no chance of an interest rate hike any time soon, we believe that our clients will be best rewarded in North American equities going forward. The overall market is priced at reasonable levels especially considering the current low levels of interest rates.

We believe that our portfolio of companies will continue to raise their dividends and buyback their stock at a rapid clip. This will be a huge benefit to our clients. We urge investors to ignore the day to day noise and focus on what really matters. Do you have the right portfolio mix to meet your current liquidity needs and retirement goals? Don’t chase yield, don’t treat stocks like pieces of paper and avoid fantasy investments. Finally, you should welcome any pullback and correction. This is your opportunity to buy more when others are fearful.

TOP PICKS

Barry Schwartz's Top Picks

Barry Schwartz of Baskin Wealth Management shares his top picks: CCL Industries, Domino’s Pizza and Parkland Fuel.

CCL INDUSTRIES (CCLb.TO)
CCL Industries is the world’s largest label maker and the only company with global scale to service multinational giants such as Unilever and Johnson & Johnson. CCL benefits from the trend towards premiumization, as consumer products companies look to redecorate their products using labels to raise prices. The management has historically done a terrific job of making opportunistic acquisitions such as Avery and Checkpoint. The stock has slumped over the last year due to high input costs and we feel that this is a good entry for a well-run company.

DOMINO’S PIZZA (DPZ.N)
Domino’s Pizza is the world’s largest pizza chain, recently surpassing Pizza Hut in terms of global system sales. Domino’s investments in technology and analytics have given it an insurmountable lead in terms of fast and affordable pizza delivery over competitors. Strong returns for franchisees and same-store growth will allow Domino’s to open more stores, which reduces delivery times while driving carryout traffic. Although valuation seems optically expensive, we think the growth of the business combined with a shrinking share count should deliver above-average returns going forward.

PARKLAND FUEL (PKI.TO)
Parkland Fuel is the largest independent marketer of fuel in Canada, distributing around 17 billion litres of fuel in 2018 across over 1,800 gas stations and their commercial distribution network. As one of the largest fuel buyers, Parkland is able to negotiate favorable supply contracts from refineries and also operates the Burnaby Refinery in B.C. which is a structurally profitable property. The management has done a terrific job of generating supply synergies on acquisitions while upgrading the convenience stores at gas stations. Parkland now has national coverage in North America and the Caribbean. It has plenty of opportunities to make acquisitions in the U.S. and grow its network. At 11 times distributable cash flow, we think the shares are cheap.