Andrew Pink's Top Picks
Andrew Pink, portfolio manager at LDIC Inc.
Focus: Canadian large caps, preferred shares and fixed income
Although we can’t predict the duration of lockdown measures and the pace of consumer re-engagement, we remain optimistic about specific segments of the equity market through the balance of 2020. We believe central banks will play a pivotal role in supporting households and businesses in an ongoing, coordinated and unprecedented manner.
We acknowledge there are currently many uncertainties within the economy that will most certainly impact the path of financial markets in the near term, including employment trends, inflationary pressures, and personal spending/consumption. Only time will tell how swiftly the world will emerge from lockdown and the resulting shape of the recovery. As investors, we have to consider the earnings impact within specific market segments and gauge the ability of individual companies to thrive within a range of scenarios.
Within our investment approach we have replaced speculative growth with high quality, consistent cash flow-generating companies. We have reduced cyclical holdings and added to positions that are less sensitive to economic conditions, including some segments of the real estate market, independent power producers and utilities. We own and continue to search for companies with superior balance sheets, healthy capital deployment flexibility and resilient earnings growth profiles.
As we face the increased probability of an economic recession over the next several quarters, we believe investors are best to choose quality over growth and those companies best equipped to weather a downturn. Security selection and asset allocation decisions will be the highest priority in the months ahead.
ISHARES S&P/TSX GLOBAL GOLD INDEX ETF (XGD TSX)
Last purchased at C$21.43 on April 28.
This Blackrock ETF invests in member companies of the S&P/TSX Global Gold Index. Newmont, Barrick, Franco-Nevada and Agnico Eagle Mines make up nearly 60 per cent of the total net asset value. Gold has recently grown to a 10 per cent weight in the TSX Composite and is currently breaking into new highs at $1,750. This is not only a flight-to-safety trade and ongoing quantitative easing will undoubtedly put pressure on real rates and drive gold prices higher as carry costs virtually disappear. While not expected in the near term, ongoing quantitative easing is likely to fuel inflationary pressures in the medium-to-long term. We expect investor anticipation will continue to drive the price of gold higher.
Further support for the direction of gold prices (unique to the current global crisis situation) relates to mine suspensions. There is a meaningful number of mines currently offline which will have a global supply impact in 2020. We believe these conditions together warrant exposure to the sector.
DESCARTES SYSTEMS GROUP INC (DSG TSX)
Last purchased at C$61.47 on Feb. 5.
Descartes Systems is a leading global logistics technology provider with a unique combination of network, applications and data content solutions. Descartes leverages proprietary cloud integrated automation technology to digitize freight logistics, helping customers manage the full lifecycle of both domestic and international e-commerce shipments. Descartes has grown organically and through acquisition to stay ahead of, and also define, its customers’ needs. The company has become increasingly important, with increasing regulatory requirements and complex trading logistics. Descartes services industry-leading customers in the fields of aviation, trucking, retailing and manufacturing while cost-effectively helping them respond to the competitive threat from companies like Amazon, Google and eBay with real-time delivery route optimization, warehouse management and execution solutions.
INTERRENT REAL ESTATE INVESTMENT TRUST (IIP-U TSX)
Last purchased at C$13.65 on May 5.
InterRent acquires, owns and develops multi-residential properties located in Toronto, Ottawa and Montreal, with approximately one-third of the portfolio located in each region. As housing affordability remains at historic lows, we expect a sustained period of high demand for multi-residential properties and upward pressure on rental rates. In addition, low interest rates help real estate companies with cost of financing. InterRent has recently seen some internal cost pressures related to the COVID-19 lockdown, but rental collection rates have remained in the high 90 per cent range through April and May and the company has sufficient available liquidity and capex flexibility.
PAST PICKS: JUNE 17, 2019
PARKLAND FUEL (PKI TSX)
- Then: $41.97
- Now: $37.37
- Return: -11%
- Total return: -8%
EXCHANGE INCOME CORP (EIF TSX)
- Then: $38.00
- Now: $24.03
- Return: -37%
- Total return: -33%
GRANITE REIT (GRT-U TSX)
- Then: $61.17
- Now: $67.44
- Return: 10%
- Total return: 15%
Total return average: -9%