Christine Poole's Top Picks: August 11, 2020

Christine Poole, CEO and managing director at GlobeInvest Capital Management
Focus: North American large caps

MARKET OUTLOOK

The broad market indices are back near their prior highs led by technology and internet-based companies who have proven their mettle and benefited from the acceleration in trends including work-from-home, e-commerce and direct streaming.

Notwithstanding, present economic conditions are in stark contrast to what prevailed back in February, attested by the underperformance of the banking sector.  Government assistance programs are masking the reality of a double-digit unemployment rate and a shrinking economy. Unprecedented monetary policy actions are also acting as a backstop to financial calamity. Economic activity will improve as lockdowns are lifted and countries reopen.  The longer businesses operate under sub-optimal conditions, the higher the likelihood for permanent impairment.  Physical distancing will remain in place until a vaccine is found and made widely available. Continued policy support is required until economies become self-sustaining.

With interest rates expected to remain near zero over the foreseeable future, stocks that can provide a steady and growing dividend are especially attractive. Be patient and wait for market dislocations to invest in financially strong companies in attractive secular growth industries.

TOP PICKS

Alphabet (GOOGL NASD) – Last purchased ~US$1,473 in July 2020

Alphabet is a global technology company, providing the world’s leading search engine, Google, and dominates in both global desktop and mobile search engine queries.  Google benefits from the ongoing secular shift to online advertising. Other growth opportunities include Google Cloud, Waymo and YouTube.

Brookfield Asset Management (BAM/A TSX) – Last purchased ~$43 in July 2020

Brookfield Asset Management is a global alternative asset manager with over $500 billion in assets. The company owns and operates assets on behalf of shareholders and clients with a focus on property, renewables, infrastructure and private equity. BAM seeks to invest in long-life, physical assets that typically benefit barrier to entry, regulatory regime or competitive advantages that provide for relatively stable cash flow streams. The stock offers a modest dividend yield of 1.5 per cent.

Fortis (FTS TSX) – Last purchased ~$53.50 in August 2020

Fortis is a diversified North American electric and gas utility company, generating its cash flow primarily from regulated assets.  Following its acquisition of ITC Holdings Corporation, a fully-regulated U.S. electric transmission utility company, over half its revenues are from the U.S.  Fortis is a stable cash flow generator, posting 46 consecutive years of annual dividend increases.  Supported by a backlog of low risk, regulated projects, Fortis has targeted average annual dividend growth of 6 per cent through 2024. Fortis offers a yield of 3.5 per cent.

 

PAST PICKS: August 13, 2019

Royal Bank (RY TSX)

• Then: $100.71
• Now: $97.49
• Return: -3%
• Total return: 1%

Disney (DIS NYSE)

• Then: US$137.01
• Now: US$130.57
• Return: -5%
• Total return: -4%

Mondelez (MDLZ NYSE)

• Then: US$52.57
• Now: US$55.31
• Return: 1%
• Total return: 4%

Total return average: 1%