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


MARKET OUTLOOK

On Aug. 23, the S&P 500 set the record for the longest bull market rally in history. A bull market is identified as the consistent rise of a stock index without falling more than 20 per cent. The last time the S&P 500 fell 20 per cent from its high was in 2009 during the worst financial crisis since the Great Depression. If you had stuck with U.S. stocks for the past 10 years, you’d have been pleasantly rewarded. The Canadian market hasn’t worked out quite as well, but that’s a story for another day.

Most of our clients have had the good fortune of participating in this bull market and as a result their portfolios are now overweight in equities, some by a considerable amount. Being overweight in equities for the past few years has been the right call, especially since competing fixed-income products offered virtually no return. Over the past few years, our investment committee decided to reduce our clients’ fixed income exposure due to low interest rates, attractive stock valuations and an improving global economy. Now we believe it’s time to rebalance somewhat.

To be clear, we’re not turning our back on equities: far from it. Even though we’re still bullish on the global economy, equity valuations are less attractive and interest rates have risen to improved levels. We believe that a portfolio of bonds will probably not outperform stocks over the next five years, but we’re concerned that, over that period, stocks will probably not have the same level of returns as in the past five years and may well be subject to considerable volatility.

TOP PICKS

Barry Schwartz's Top Picks

Barry Schwartz of Baskin Wealth gives his outlook for shares of Activision Blizzard, Facebook and BlackRock.

ACTIVISION BLIZZARD (ATVI.O)
NTM P/E: 27 times. Dividend yield: 0.46%.

Activision Blizzard is one of the largest video game companies in the world. The average gamer spends 86 minutes a day playing video games. This doesn’t include the time spent watching others play games over streaming media. CEO Bobby Kotick has done a terrific job of running the business in a profitable manner by focusing on select key titles that have eSports and post-purchase monetization potential. Just last month, Activision Blizzard sold eight new Overwatch League franchises, including to one in Toronto. Activision Blizzard’s balance sheet is perfect, and we expect the CEO to use this opportunistically.

FACEBOOK (FB.O)
NTM P/E: 20 times.

We believe that at its current price, Facebook offers an unparalleled opportunity. Facebook is guiding for over 30 per cent growth, yet its stock is trading at an average multiple. Instagram is growing at a tremendous rate and offers massive potential. Other products like Messenger and WhatsApp are only just getting started in terms of their monetization. We think that Facebook should emerge as a winner as smaller competitors are proportionately harmed by the heavier regulation.

BLACKROCK (BLK.O)
NTM P/E: 17 times. Dividend yield: 2.6%.

BlackRock is the largest asset management company in the world with over $6 trillion under management. It is best known for its iShares ETFs, which is the largest ETF franchise in the world with around 40 per cent of global ETF assets. iShares make up around 30 per cent of Blackrock’s current assets under management and is growing at double digits per year. There are secular trends benefiting the ETF business including their low fees and ease of which they can be bought. ETFs have a long runway of opportunity given the global ETF market is about $3 trillion versus $16 trillion managed by mutual funds.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
ATVI N N Y
FB Y N Y
BLK Y N Y

 

PAST PICKS: JULY 18, 2017

Barry Schwartz's Past Picks

Barry Schwartz of Baskin Wealth reviews his past picks: Delta Air Lines, Waste Connections and KAR Auction Services.

DELTA AIR LINES (DAL.N)

  • Then: $53.96
  • Now: $58.13
  • Return: 8%
  • Total return: 11%

WASTE CONNECTIONS (WCN.TO)

  • Then: $81.52
  • Now: $103.00
  • Return: 26%
  • Total return: 28%

KAR AUCTION SERVICES (KA.N)

  • Then: $40.73     
  • Now: $61.67
  • Return: 51%
  • Total return: 56%

Total return average: 32%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
DAL Y N Y
WCN N Y Y
KAR N Y N

 

TWITTER: @BarrySchwartzBW
WEBSITE: baskinwealth.com