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

MARKET OUTLOOK

The second quarter will mark the bottom in economic and corporate profit growth. Countries have gradually reopened their economies and accordingly economic conditions have improved, albeit still significantly below pre-crisis levels. Many consumers are receiving substantial financial support from government programs, masking the severity of the decline in household income. Forbearance by financial institutions on mortgage payments is also helping to alleviate financial distress.

The resiliency in global equity markets reflects optimism for ongoing policy support and medical advancements to treat the virus. For now, the financial burdens that have been incurred by governments are being ignored. Corporate profits are expected to be down significantly in the second quarter and for the whole year. The impact of social distancing will hamper the profit recovery of many businesses, suggesting the recession may be more protracted than expected. As fall approaches, there will be increasing focus on the U.S. election and the implications of various outcomes. Given the difficulty in forecasting the shape of the global economic recovery which is largely dependent on the path of the pandemic as well as the uneasy political landscape in many countries, inevitable pullbacks will occur providing opportunities to purchase companies at attractive prices.

TOP PICKS

Brookfield Renewable Partners (BEP/U TSX)
Last purchased in July 2020 at about $66

Brookfield Renewable is a global renewable energy company. Its generation portfolio consists of 74 per cent hydroelectric, 20 per cent wind and 6 per cent solar. The company’s cash flows are supported by a strong contract profile with 95 per cent of total generation under long-term contracts, with a weighted average remaining contract length of 14 years. With a track record of consistently increasing its distribution, Brookfield Renewable currently provides a yield of 4.1 per cent.

Mondelez (MDLZ NYSE)
Last purchased in July 2020 at about $51

Mondelez is a global snacking company with top category market shares in biscuits, chocolate and candy. Biscuits represent 43 percent of sales, chocolate 32 per cent, gum and candy 13 per cent, cheese and grocery 7 per cent and beverages 5 per cent. Its portfolio of leading global brands include Oreo, beVita, Ritz, Cadbury, Toblerone, Trident, Dentyne and Halls. With close to 40 per cent of its revenues from emerging markets, Mondelez is well positioned to benefit from the growing middle class population in these regions. Per capita consumption of confectionary and biscuits in developing countries are significantly below that of developed countries and is expected to increase as personal income levels rise. Mondelez provides investors with a dividend yield of 2.2 per cent.

WSP Global (WSP TSX)
Last purchased in July 2020 at about $81

WSP Global provides engineering and design services to clients in the transportation and infrastructure, property and buildings, environment, power and energy, resources and industry sectors. Through strategic acquisitions, WSP has expanded its global presence with Canada representing 16 per cent of revenues; Europe, the Middle East, India and Africa 35 per cent; the Americas 33 per cent and Asia Pacific 16 per cent. WSP is committed to its proven growth strategy of being a consolidator within a fragmented industry, continuous margin improvement and pursuing organic growth while maintaining a strong balance sheet. WSP offers a dividend yield of 1.8 per cent.

PAST PICKS: JULY 10, 2019

Loblaw (L TSX)

• Then: $67.31
• Now: $69.76
• Return: 4%
• Total return: 6%

JPMorgan Chase & Co. (JPM NYSE)

• Then: $113.02
• Now: $99.44
• Return: -12%
• Total return: -9%

United Technologies (UTX NYSE)
Merged with Raytheon (RTX NYSE) on April 3, 2020.

• Then: $130.45
• Now: $62.22
• Return: -19%
• Total return: -17%

Total return average: -7%