Full episode: Market Call for Wednesday, September 16, 2020
Brett Girard, chief financial officer and portfolio manager at Liberty International Investment Management
Focus: Global stocks
Economic data we are seeing from the non-farm employment (unemployment), real retail sales (consumer spending), industrial production (business activity), FAA (flights) and Open Table (in-restaurant dining) shows that activity and spending has sprouted green shoots since March. However, we are still a ways off from pre-COVID levels.
We continue to remain cautious and anticipate volatility in the coming months as the market narrative dances between the U.S. presidential election, COVID and China-U.S. tensions. 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, preservation of capital, not a few more points of return, should be top of mind. Keeping some cash available to add to mispriced names with strong free cash flow should be considered.
Alimentation Couche-Tard (ATD/B TSX)
Most recent purchase $44.69 on 8/25/2020
Over the past five years, cash flow from operations has grown at 16.5 per cent and dividends have grown at 22.8 per cent (including a 17 per cent increase in June). Shorter-term catalysts include increased business as COVID restrictions are lifted, M&A and further focus on fresh fast food private label offerings. Longer-term, we are interested to see progress with the broader rollout of Norwegian EV pilot and their recreational cannabis offering.
Balchem (BCPC NASD)
Most recent purchase USD$1023.43 on 8/12/2020
Balchem is an under-the-radar, narrowly-followed, $3-billion cash cow involved in human and animal nutrition and specialty products. Through the quarter ended June 30, 2020, grew revenue 7 per cent, EBITDA 10 per cent and free cash flow 12 per cent. Longer-term have almost quadrupled the dividend in the last 10 years without significant leverage.
Novozymes (NZYMB CPH)
Most recent purchase DKK$381.66 on 7/10/2020
Novozymes is a Danish-based leader in industrial enzymes with 48 per cent global market share and 24 per cent of total sales coming from emerging markets. It’s a very efficient capital allocator, spending 13.7 per cent of sales on research and development. They have been growing the dividend by 15.68 per cent since 2000 and decreasing share count through buybacks by 12 per cent over the last 10 years.
PAST PICKS: OCTOBER 28, 2019
TD BANK (TD TSX)
- Then: $75.15
- Now: $63.37
- Return: -16%
- Total Return: -13%
DANAHER (DHR NYSE)
- Then: $136.21
- Now: $209.27
- Return: 54%
- Total Return: 54%
INTERTEK (ITRK LON)
- Then: £5,262.00
- Now: £6,322.00
- Return: 20%
- Total Return: 22%
Total return average: 20%