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

MARKET OUTLOOK:

2023 is offering investors a myriad of attractive investment opportunities both short and long term. Short-term investors can now get four per cent plus on cash equivalent products like high-interest savings accounts. Fixed-income-seeking investors can buy short- and medium-term Canadian corporate bonds that are yielding five per cent and get a good chunk of the return as tax-advantaged capital gains.

Those looking for yield from equities can find many stocks with yields above four per cent from companies that have a history of raising dividends each year. Stocks of high-quality profitable companies such as Adobe, Brookfield, FirstService and Microsoft, to name only a few have been marked down dramatically, yet the long-term outlook for most of these companies is very bright.

I urge all investors to stick with their investment process and not let the short-term uncertainty knock them off their long-term path. At some point, the market will start to recover even when news may worsen as eventually, investors will start to price in a recovery. The economic data doesn’t have to improve for the market to rally, it just has to be less bad than what is already priced in. The more people fear the current uncertainty, the more opportunities appear. For now, we believe 2023 will deliver decent results to investors in many different asset classes

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TOP PICKS:

Apple (AAPL NASD)

Despite concerns over a recession and supply chain issues in China, Apple remains the most dominant company in consumer technology. Proprietary chips such as the M2 are widening the performance gap over competitors, while user satisfaction and the installed base remain at record highs, which should drive demand for future products and services revenues. We think shares are attractive trading at just 21x earnings and $50 billion of cash.

BlackRock (BLK NYSE)

Blackrock was impacted by weak equity and bond prices in 2022, but it still brought in over $200 billion in net inflows in 2022 unlike most of the asset management industry. Looking ahead, Blackrock will benefit from the secular growth in ETF adoption especially for fixed-income ETFs, while the weak financial markets should drive asset growth through increased demand for outsourced CIO services. Given its strong balance sheet, Blackrock is well-positioned to make acquisitions to add product or distribution capabilities. We think shares are attractive at 22x earnings especially if the market rebounds.

Costco (COST NASD)

Despite being relatively resilient in 2022, we like Costco shares for the long run at current prices. Inflation for food and gas and supply chain constraints have highlighted the strength of Costco’s business model relative to the competition. Strong market share gains in 2022 set Costco up for a likely membership fee hike in 2023. Beyond this year, Costco has a long runway for growth in building out its e-commerce business, adding adjacent services to reinforce the membership value and opening stores in Europe and China. 

PAST Picks: January 4, 2022

CoStar Group (CSGP NASD)

• Then: $77.38
• Now: $78.48
• Return: 1%
• Total Return: 1%

Watsco (WSO NYSE)

• Then: $311.32
• Now: $258.13
• Return: -17%
• Total Return: -14%

Copart (CPRT NASD)

• Then: $146.12
• Now: $62.29 (after 2-for-1 stock split on Nov. 4, 2022)
• Return: -15%
• Total Return: -15%

Total Return Average: -9%