Christine Poole, CEO and managing director at GlobeInvest Capital Management

Focus: North American large cap stocks

MARKET OUTLOOK:

Investors have largely ignored the political chaos on Capitol Hill and instead focused on the positive implications of the Democrats’ unified control of the House, Senate and White House. Expectations include additional fiscal stimulus, legislation to advance climate change and infrastructure investments and a more stable, less divisive White House. While Democrats have advocated for higher taxes on the wealthy, corporations and capital gains, any substantive changes may be delayed until the economy is on solid footing.

The dichotomy between the performance of global equity markets and economic conditions could not have been more pronounced the past year. Swift “unprecedented” monetary and fiscal actions around the world have cushioned the normal effect of a recession. The timely development of successful vaccines means there is a visible path to a normalization of economic activity.

The near-term economic outlook has weakened with the resurgence of the virus and the discovery of new and more contagious variants. In response, many countries have re-implemented restrictive travel protocols and containment measures. The bridge from the present to when mass inoculation is achieved remains continued policy support.

The backdrop of near-zero interest rates globally is very supportive for equity valuations. Excessive liquidity, however, incentives risk-taking. Speculative activity and a widening disconnect between business fundamentals and valuations in some sectors suggest nascent signs of a bubble are emerging.

TOP PICKS

Fortis (FTS TSX) – last purchased around $51, 01/21

Fortis is a North American electric and gas utility company generating cash flow primarily from regulated assets with over half its revenues from the U.S. Fortis is a stable cash flow generator, posting 47 consecutive years of annual dividend increases. Supported by a backlog of low risk, regulated projects and cleaner energy initiatives, Fortis has affirmed an average annual dividend growth of six per cent through 2025.  Fortis offers a yield of 3.9 per cent.

Home Depot (HD NYSE) - last purchased around $270, 01/21

Home Depot is the leading home improvement specialty retailer with close to 2,300 retail stores in North America. The home improvement sector continues to benefit from attractive affordability and an aging housing stock. Home Depot’s supply chain investments to improve distribution efficiency and e-commerce capabilities support its industry leading position. Home Depot provides a dividend yield of 2.6 per cent.   

S&P Global Inc. (SPGI NASD) - last purchased around $315, 01/21

S&P Global Inc. is a diversified financial information services company and operates in four primary segments: ratings (47 per cent of revenues), market intelligence (28 per cent), S&P Dow Jones indices (13 per cent) and Platts (12 per cent). Its attractive growth businesses are leading players within their respective industry that are highly profitable and scalable. Due to the subscription-based nature of many of its services, 70 per cent of SPGI’s revenue base is recurring. SPGI provides a dividend yield of 0.9 per cent.

PAST PICKS: January 14, 2020

DollarTree (DLTR NASD)

• Then: $90.57
• Now: $109.34
• Return: 20%
• Total Return: 20%

Loblaw (L TSX)

• Then: $66.97
• Now: $64.26
• Return: -4%
• Total Return: -2%

Royal Bank (RY TSX)

• Then: $105.05
• Now: $108.34
• Return: 3%
• Total Return: 8%

Total Return Average: 9%