Brendan Caldwell, president and CEO of Caldwell Investment Management
Focus: North American large cap stocks


As long as interest rates remain low, there is an incentive for the market to remain strong. Historically, low rates meant inflation in the price of goods and services. What we are seeing – and indeed have seen since the 2008 financial crisis ended – is asset inflation. An asset is a vehicle to store money, such as houses, art or the stock market. Low interest rates have actually had the opposite effect of what was intended by the government, which was to stimulate economic growth by making cash accessible for all. Instead, the price of stocks and houses became more expensive. Those who already have assets have seen them rise in value; those who do not have seen prices, particularly housing, rise out of reach.

COVID-19 has accelerated structural changes in the way business is done and with certain market sectors benefitting strongly. Some of these changes were underway pre-COVID and some we believe will be permanent. We are seeing that in the wide divide between the winners and losers. Sectors such as information technology (22.5 per cent year-to-date), communication services (5 per cent) and consumer discretionary (19.1 per cent) have outperformed. They are enabling the transition to a remote work environment as well as allowing consumers to communicate and entertain themselves at home. Consumers are also diverting spending away from travel, restaurants and entertainment towards areas like health and wellness and home improvement. Notable losers have been the energy (down 50 per cent year-to-date), financials (24.2 per cent) and real estate (11.7 per cent) sectors. Even with a rebound off the lows, there’s a lot of uncertainty around the future demand for air and car travel. Less physical foot traffic and the possibility for more permanent remote work arrangements have also weighed on the real estate sector.



Dollar General is the largest discount retailer in the U.S. with over 16,000 locations. They’ve executed well on turning stores into a one-stop shop by adding perishable goods, fresh produce and health and beauty products. That’s led to increased customer stickiness (more return visits) and higher basket sizes. It’s also helping capture market share from other discounters, grocers and drug stores. They’ve also taken greater control over their own distribution and continue to make headway with shrink (theft) and private label product penetration which should be accretive to margins over time. They have a strong history of free cash flow growth and the dividend has grown every year since initiative five years ago.


UnitedHealth is the largest U.S. health insurance company by premiums written. It also has the Optum segment which operates a 50,000 physician care provider network, offers healthcare consulting and pharmacy benefit management. They were the first company to combine the insurer, pharmacy benefit manager and care network under one roof, which has yielded strong benefits in lowering the total patient cost of care (evident in lower than peer medical cost ratios). The OptumHealth network is a $100 billion revenue opportunity by 2028 versus $30 billion today and allows United to capture a greater share of a patient’s healthcare spend. Spending on medicare is expected to remain strong for at least the next five years and is supported by an aging senior population. UnitedHealth is the medicare advantage leader by far and continues to take incremental market share.

How has COVID affected the business? To date they’ve provided $1.5 billion in direct consumer support through premium forgiveness and suspension of member cost-sharing and are still expecting another $1 billion in future periods.


Broadcom is a leading designer of semiconductors used in smartphones, cloud computing centers and routers. It also provides software to help enterprises manage central databases and information security. Contrary to popular belief, not every company can move to the public cloud: banks, healthcare providers and other companies with sensitive data often need to run private or hybrid clouds and Broadcom software helps manage this. Its higher R&D investment than peers translates into technological leadership; this helps maintain high market share over time and leads to greater pricing power (gross margins have expanded 20 per cent over the last 10 years). Its entrance into software adds high margin, recurring revenue with sticky customers. The integration of CA Technologies and Symantec provide cross-selling opportunities among core base of Fortune 500 companies. The company has peer-leading operating margins, strong free cash flow generation and a dividend that grows along with free cash flow. It’s got a very reasonable valuation at 14 times forward earnings .

Apple and its related companies were 20 per cent of 2019 revenue. Broadcom recently secured a deal to be an exclusive supplier of certain content for the next three generations of 5G iPhones; it provides $15 billion in guaranteed revenue.