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

MARKET OUTLOOK

If there is one lesson that investors can learn from this year, it’s this: Stocks can go up and they can go up a lot even in an uncertain environment. Volatility is a natural function of stock markets. Stocks generally do a good job of tiptoeing through a field of crisis landmines. I think a lot of investors are focusing too much on the headlines without determining if any of these will have a material impact on their long-term goals and objectives. Economic growth has slowed, but whether we head into a recession or see a pickup in the next 12 months is completely unknown and it’s folly to even predict.

The trade issue is the main reason for the global slowdown and why interest rates around the world are heading lower. It’s solvable and a surprise resolution is still the most likely outcome. Our advice is always the same: Stay unemotional, don’t let the volatility swings scare you out of quality assets and invest in stocks only if you have a long-term horizon.

TOP PICKS

ACTIVISION BLIZZARD (ATVI:UW)

Activision Blizzard’s stock fell significantly in the last half of 2018 due to concerns about its lack of new games in 2019.  We thought this reaction was short-sighted given that Activision’s management has repeatedly insisted that its game pipeline is as strong as ever. We think the company is well positioned for multi-year growth, especially given its exposure to fast growing e-sports.  There is also potential for opportunistic acquisitions or buybacks given the $4 billion of cash that’s growing on the balance sheet.

IAA (IAA:UN)

IAA is a provider of salvage car auctions. It operates over 190 salvage yards in North America and U.K.  Its business should benefit from several tailwinds, such as distracted driving, rising repair costs and an aging car fleet in North America. IAA trades at a material discount to its competitor Copart and we believe it has a good opportunity to narrow this gap over the coming years. 

BLACKROCK (BLK:UN)

BlackRock is the largest asset manager in the world with US$6.8 trillion under management. It should benefit from the long-term trends of more portfolios moving towards low-cost passive investing. With low interest rates, investors are seeking out higher-yielding fixed income products and other yield alternatives. This part of BlackRock’s business is growing at double-digit rates. We believe that BlackRock will deliver organic growth in the second half of 2019 and its shares are too cheap given upcoming growth prospects.

PAST PICKS: OCT. 31, 2018

VISA (V:UN)

• Then: $137.85
• Now: $184.73
• Return: 34%
• Total return: 35%

TMX GROUP (X:CT)

• Then: $82.79
• Now: $116.67
• Return: 41%
• Total return: 45%

BROOKFIELD INFRASTRUCTURE PARTNERS (BIP-U:CT)

• Then: $49.17
• Now: $63.43
• Return: 29%
• Total return: 35%

Total return average: 38%

WEBSITE: baskinfinancial.com