Brett Girard, chief financial officer and portfolio manager, Liberty International Investment Management

FOCUS: Global stocks 

MARKET OUTLOOK:

Conflicting macroeconomic news has kept the major markets largely range-bound since Halloween. By Friday we will have a slew of new data points, as two-thirds of the S&P 500 will have reported first-quarter earnings, including Microsoft, Amazon, Meta and Alphabet. Additionally, the release of March PCE will give another update on the fight with inflation. Meanwhile, the employment market is showing signs of topping with unemployment marginally higher at 3.6 per cent and job openings (JOLTS) down over one million to 9.9 million since the peak.

 The big question that no one, including the central bankers, can predict is determining when interest rates will be deemed sufficiently high.

While we wait for an answer, investors should be taking advantage of opportunities to accumulate high-quality names that have sustainable yields in their portfolios. Short-term guaranteed investment certificates face reinvestment risk as they are likely to mature at lower rates than today, so locking in longer-term yields through interest or dividends would be wise. In doing so, consider the fact that international equities are cheaper than U.S. and Canadian counterparts. Additionally, European bond yields are still rising as the ECB is behind North America in the interest rate hiking cycle. 

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TOP PICKS:

Fomento Economico Mexicano (FMX NYSE)

Sold a portion of its stake in Heineken after a strategic review, raising US$3.4 billion. Meanwhile, Cola-Cola Femsa, the largest global coke bottling franchise, continues to produce free cash. FEMSA will use free cash to promote growth across core businesses of convenience stores, gas stations and pharmacies while growing its digital loyalty footprint.

Analog Devices (ADI NASD)

World’s largest manufacturer of analog integrated circuits, which are very small components that play a role in everything from wearable devices to self-driving cars to wireless communication of 5G networks. ADI has consistently maintained a 33 per cent operating free cash flow margin and tripled the dividend over the last 10 years. Trading at only ~18x NTM P/E, this is a value-oriented way to gain exposure to the semiconductor space.

Nutrien (NTR TSX)

While the share price has fallen over the last year, the long-term combination of global population growth and higher GDP per capita in emerging markets will drive demand. Nutrien is one of the best-positioned agricultural names due to its massive low-cost operations, ability to expand production, high excess free cash flow used for debt reduction, and increasing shareholder distributions.

PAST PICKS: March 25, 2022

Fairfax Financial (FFH TSX)

• Then: $650.98
• Now: $912.77
• Return: 40%
• Total Return: 43%

CN Rail (CNR TSX)

• Then: $169.73
• Now: $160.84
• Return: -5%
• Total Return: -3%

Novozymes (NZYMB CPH)

• Then: 436.60 DKK
• Now: 367.00 DKK
• Return: -16%
• Total Return: -14%

Total Return Average: 9%