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

FOCUS: global stocks

MARKET OUTLOOK:

In the past year, the Central Bank balance sheets of the U.S. Federal Reserve, European Central Bank, Bank of Japan, and the People’s Bank of China have expanded by over 50 per cent from ~$20T to ~$31T. Although these actions prevented global collapse, they were not without unintended consequences, including significant inflation in financial assets.

As the economic recovery continues, there is uncertainty around the persistence of financial asset inflation and the implications of inflation expanding beyond financial assets into broader consumption.

In this uncertainty, we advise investors to look through revenue growth to consider unit economics and free cash flow contribution. Companies strong in these attributes, especially those with a clean balance sheet, can be nimble in a changing macroeconomic environment and reward holders with rising dividends. 

TOP PICKS:

Analog Devices (ADI NASD) – Last purchased on March 23, 2021 at US$151.02 

Analog Devices is the world’s largest manufacturer of analog integrated circuits, very small components that play a role in everything from wearable devices to self-driving cars to wireless communication of 5G networks. Their industrial segment will be front and centre over the next five years and the global robot installed base is expected to increase by about 60 per cent. Financially, Analog Devices has consistently maintained a 33 per cent operating free cash flow margin and tripled the dividend over the last 10 years.

Stryker (SYK NYSE) – Last purchased on March 23, 2021 at US$231.87 

Stryker is still trading around pre-pandemic levels and is expected to grow sales by 19 per cent this year, leveling off to 8-10 per cent going forward. It is growing recurring revenue with the Mako Robot Technology which improves surgeon accuracy and durability of joint replacements. Stryker has also successfully shored up their device offerings with the integration of Wright Medical, a leader in shoulder, ankle, and foot implants and procedures.

Brookfield Asset Management (BAM/A TSX) – Last purchased on March 23, 2021 at $56.38

Brookfield Asset Management is also still trading around pre-pandemic levels. Size and skill allows this company to position itself as the buyer of choice for cash-strapped governments and out of favour businesses. Fee baring capital continues to increase, as do their investment offerings, including a recently launched ESG directive.

PAST PICKS: April 1, 2020

Unilever (UL NYSE)

• Then: $49.19
• Now: $56.21
• Return: 14%
• Total Return: 18%

Telus (T TSX)

• Then: $21.98
• Now: $25.23
• Return: 15%
• Total Return: 20%

Cash

Total Return Average: 19%

WEBSITE: www.libertyiim.com