Christine Poole's Top Picks: June 16, 2021

Christine Poole, CEO and managing director at GlobeInvest Capital Management

Focus: North American Large Cap Stocks

MARKET OUTLOOK:

The outlook for the global economy continues to improve led by the United States where easing of pandemic restrictions and a more broad-based reopening has occurred more rapidly than in other developed countries. The donation of excess vaccines by the G7 countries to low-income countries is necessary to overcome the pandemic across the world, fully eliminate border restrictions, and set the stage for a global synchronized recovery.

While inflation has picked up materially in the past two months, a handful of categories most closely tied to the reopening of the service sector and supply chain bottlenecks have accounted for an outsized share of the rise. Many households have amassed extra savings over the past year and for now, consumers are willing to pay more for goods and services as they come out of hiding. 

In the amidst of the inflation spike, the reaction from the bond market is an interesting observation with the 10-year U.S. Treasury bond yield receding to 1.50 per cent from a peak of 1.74 per cent at the end of March. Whilst the retracement is supportive that the current inflationary spike is transitory, it also implies slower growth ahead.

The U.S. jobs recovery has moderated recently, likely reflecting ongoing health concerns and enhanced supplemental federal pandemic unemployment benefits. With some market pundits suggesting the possibility of wage inflation as a fallout, business investment toward labour-saving technologies is resulting in higher productivity which will act as an offset. Job seekers should return to the workforce as government support programs expire and education systems fully reopen.

The outlook for equities remains favourable driven by the ongoing recovery from the pandemic, accommodative monetary and fiscal policies, and positive corporate earnings revisions. Portfolios should be diversified across sectors and consist of both financially sound income and growth stocks.

TOP PICKS:

Apple (AAPL NASD) recent purchase price $125 range in June 2021

Apple has successfully transitioned from a product driven company to a provider of both products and recurring high margin services, with the latter accounting for a third of profits. Apple’s large and growing installed base is supportive for continued growth in services as more digital offerings are added and higher attach rates to its wearables. Apple offers a modest dividend yield of 0.7 per cent.

Home Depot (HD NYSE) recent purchase $305 range in June 2021

Home Depot is the leading home improvement specialty retailer with close to 2,300 retail stores in the United States, Canada, and Mexico. The longer-term outlook for the home improvement sector continues to benefit from home value appreciation, 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 2.1 per cent.   

TD Bank (TD TSX) recent purchase $87.50 range in June 2021

TD is a leading North American bank, deriving 56 per cent of its net income from Canadian retail operations, 34 per cent from U.S. retail and 10 per cent from wholesale/capital markets. TD is well-positioned to participate in the economic recovery through improving consumer activity and business investment. Its strong capital base provides flexibility to make opportunistic acquisitions. TD’s current dividend yield is 3.5 per cent.

PAST PICKS: June 24, 2020

Abbott Laboratories (ABT NYSE)

• Then: $87.30
• Now: $110.83
• Return: 27%
• Total Return: 29%

CGI Inc. (GIB/A TSX)

• Then: $84.25
• Now: $111.22
• Return: 32%
• Total Return: 32%

WSP Global (WSP TSX)

• Then: $81.85
• Now: $141.50
• Return: 73%
• Total Return: 76%

Total Return Average: 46%

Twitter Handle: @christine_globe

Company Website: www.globe-invest.com