Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management
Focus: North American large caps

MARKET OUTLOOK

As long-term investors, we are doing our best to ignore the day-to-day distractions. No question we are in a very uncertain environment and that makes it hard to focus one’s attention on the long term. One thing we do know is that great companies will persist. If you owned a mediocre business heading into this pandemic, it is unlikely that the company will be a better business after COVID-19 and the end of a recession.

For the most part, the best-quality investments are in the U.S. The performance of U.S. stocks has beaten every other country going back 30 years. This is due to the earnings growth from asset-light technology companies like Apple, Google, Microsoft, Visa and Facebook. These are just a few of the U.S. stocks that our clients own today. The most successful businesses in the world are companies that have asset-light business models. These are businesses that do not require significant ongoing capital expenditures to make a product or service.

As investors in high-quality companies, we want to own businesses that are price makers. A price-maker company has the ability to raise the price of the product or service it sells at any time. A price-taker company has no control over the price of the product or service it sells; they tend to be not only cyclical but also capital intensive. An example of a price-taker business is an oil and gas producer: It can do everything right, find lots of oil and keep its costs low, but ultimately it has no control over the price of the product it sells. In our opinion, there are not enough high-quality companies in Canada with experienced management, strong balance sheets and enormously profitable business models to create a properly diversified portfolio.

TOP PICKS

FERRARI (RACE NYSE)

We think Ferrari is one of the best businesses in the world. If you want to buy a Ferrari today, good luck trying to get one: The waiting list is over a year-long! Ferrari isn’t an automaker, but a luxury goods company that has an ambitious plan to double its earnings over the next five years. We believe that it’s achievable with increased production, new product lines, price increases and margin growth.

CANADIAN APARTMENT PROPERTIES REIT (CAR/U TSX) 

Shares of Canadian REITs have been hurt dramatically during this crisis as investors worry about the viability of commercial and office real estate. One thing is certain: you have to live somewhere. As a result, Canadian Apartment REIT is well positioned as the largest apartment landlord in the country, with a focus on reasonably priced rental units in Toronto, Vancouver, and Montreal. We remain bullish on the long-term fundamentals of multi-family real estate in these three cities due to supply shortages and immigration growth and think shares are attractive, with a 2.9 per cent distribution yield.

COSTCO (COST NASD)

Costco is a well-run operation that cares deeply about its employees, customers and shareholders. Costco has an extremely long runway of growth ahead of it. The company still has an opportunity to add hundreds of stores in the U.S. as well as internationally. The company is now utilizing e-commerce and expanding its services beyond retail to gain a further share of its customers’ wallets.

PAST PICKS: JUNE 24, 2019

TMX GROUP (X TSX)

• Then: $91.74
• Now: $128.71
• Return: 40%
• Total return: 42%

BECTON DICKINSON (BDX NYSE)

• Then: $249.98
• Now: $230.87
• Return: -8%
• Total return: -6%

CONSTELLATION SOFTWARE (CSU TSX)

• Then: $1223.93
• Now: $1480.20
• Return: 21%
• Total return: 21%

Total return average: 19%