Full episode: Market Call Tonight for Tuesday, January 14, 2020
Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management
Focus: North American large caps
As we look forward to 2020, we believe that conditions are ripe for our clients’ portfolios to continue to improve. You can hardly ask for a better investing environment: Corporate profits for U.S. companies are at record levels, employment is near record levels and interest rates are low (and probably not going higher any time soon). Also, the signing of the phase 1 trade agreement between U.S. and China will add much needed confidence to the global economy. For those skeptical about investing when the market is at an all-time high, we have good news for you: historically after hitting a high, the market is higher six months later more than 80 per cent of the time.
We know that many challenges lay ahead in 2020. The North American economy is still suffering from the aftereffects of a prolonged trade dispute and has yet to find its footing. In addition, we expect to see volatility as we get closer to the U.S. presidential election.
As always, we take our cues from the companies in which we invest. We saw significant dividend increases and material share-buyback announcements from our portfolio companies. We expect higher earnings from our portfolio companies in 2020, and our research team continues to hunt for better investment ideas.
We look forward to the opportunities and the challenges that 2020 will bring and we are optimistic that the current highs in the stock market will beget new highs.
TMX GROUP (X TSX)
TMX Group is at the beginning stages of its journey to transform itself from an operator of the TSX and TSX Venture stock exchanges to a global business with a focus on data analytics. We see many positive tailwinds for its business, including record index levels, significant global liquidity and a balance sheet that has been significantly de-risked. At 18 times earnings, TMX trades at a discount to U.S. peers while offering a rising dividend stream to shareholders.
ACTIVISION BLIZZARD (ATVI NASD)
Activision Blizzard is one of the largest video gaming companies in the world, responsible for popular games such as Call of Duty, Warcraft, and Candy Crush. The company benefits from the long-term tailwinds to the video game industry, including e-sports, microtransactions and mobile gaming. We believe the upcoming releases of Diablo 4 and Overwatch 2 as well as further unannounced games will demonstrate the resilience of Activision Blizzard’s brands. There are also opportunities for strategic acquisitions given Activision’s strong balance sheet.
AMAZON (AMZN NASD)
We believe that Amazon shares are a good buy after underperforming the S&P 500 last year. In 2019, Amazon invested heavily in initiatives that should add a significant amount of value for its Prime members such as free one-day shipping and streaming video content. We see a massive runway of growth for Amazon.
PAST PICKS: JAN. 25, 2019
DELTA AIR LINES (DAL NYSE)
- Then: $47.69
- Now: $61.45
- Return: 29%
- Total return: 32%
CN RAIL (CNR TSX)
- Then: $110.37
- Now: $122.95
- Return: 11%
- Total return: 13%
MAGNA INTERNATIONAL (MG TSX)
- Then: $69.29
- Now: $69.83
- Return: 1%
- Total return: 4%
Total return average: 16%