Brett Girard's Top Picks: July 24, 2020

Brett Girard, chief financial officer and portfolio manager at Liberty International Investment MGMT
FOCUS: Global equities

MARKET OUTLOOK

The economic data we are seeing from non-farm employment (unemployment), real retail sales (consumer spending), industrial production (business activity), FAA (air travel) and OpenTable (in restaurant dining) show activity and spending has ticked up from the lows of March, but there is still a ways to return to pre-COVID levels.

Governments in Canada, the U.S. and the EU among others have and continue to provide fiscal and monetary stimulus to try to keep the wheels of the economy turning. While there is no question these efforts have lifted the stock market, until we have a proven vaccine treatment and/or laws requiring masks, it will be the pandemic rather than the lack of stimulus that continues to put pressure on the economy.

We continue to remain cautious and anticipate volatility in the coming months as the market narrative dances between COVID, U.S.-China relations, and the U.S. presidential election, the latter of which is now 102 days away. Investors should be cognizant of their risk tolerance and how that translates into their asset mix. For those currently in or planning to enter retirement in the next decade, defense vis-à-vis preservation of capital is key. Asset-light equities with clean balance sheets, investment grade bonds issued by appropriately levered entities, inflation-linked bonds and cash should be considered.

TOP PICKS

STANTEC (STN TSX)
Most recent purchase July 13, 2020 at $43.45.

Stantec’s turnaround continues. In the last quarter we saw revenue grow 5.7 per cent, gross margin at 53 per cent and net income from continuing operations increased by 8 per cent. With exposure to water, buildings, energy and resources, and environmental services in Canada, the U.S. and Europe/U.K., Stantec is well positioned to benefit from maintenance and de novo government infrastructure spending.

NUTRIEN (NTR TSX)
Most recent purchase July 13, 2020 at $45.17.

Nutrien is a vertically-integrated agricultural company that owns the value chain from extraction of potash, nitrogen and phosphate through to retailing product to over 500,000 customers worldwide. U.S. retail operations provide stability while the ROW segment and private label products continue to be a source of growth. Fertilizer prices are near historical lows and demand is expected to pick up on the back of increased corn acreage and lower inventory in the U.S. Plus dividend yield is currently 5.5 per cent.

THERMO FISHER SCIENTIFIC (TMO NYSE)
Most recent purchase July 13, 2020 at $379.44.

The popularity of products used to research and test COVID infections, therapies and vaccines more than offset weakness in demand for Thermo Fisher’s other laboratory products as revenue grew by 10 per cent and operating income grew by 26 per cent. They’re involved in gene sequencing instruments, spectrophotometers to quantify DNA and RNA concentrations with small sample amounts, electron microscopes to determine viral structure and chromatographs and mass spectrometers for vaccine QA/QC. 25 per cent of revenue was Covid-related and this segment is expected to experience continued growth as scientists worldwide search for ways to end the pandemic.

PAST PICKS: JULY 29, 2019

ROPER TECHNOLOGIES (ROP NYSE)

• Then: $361.31
• Now: $418.46
• Return: 16%
• Total Return: 16%

ATRION (ATRI NASDAQ)

• Then: $755.75
• Now: $624.67
• Return: -17%
• Total Return: -17%

MONEYSUPERMARKET.COM (MONY LON)

• Then: £363.00
• Now: £300.46
• Return: -17%
• Total Return: -14%

Total Return Average: -5%