Christine Poole, CEO and managing director at GlobeInvest Capital Management

FOCUS: North American large cap stocks

MARKET OUTLOOK:

The global economic landscape has changed considerably over the past few weeks. The Russian invasion of Ukraine has sent oil prices to near historical highs, as well as propelling agricultural commodity prices up. Inflation will persist and be higher over the foreseeable future. 

While excluded by central banks in measuring inflation, higher energy and food costs will erode growth in real income, which will likely lead to slower growth in consumer spending. Buffers to absorb higher petroleum prices include generally solid U.S. household balance sheets and a healthy employment situation. Nonetheless, U.S. economic growth is being revised down whilst it is still expected to remain positive. The outlook for the Eurozone is more dire given its proximity and dependence on Russian imported crude oil and natural gas.      

The combination of slower growth and higher inflation amidst a robust job market poses a dilemma for the central banks in the U.S. and Canada.  With employment near pre-COVID levels, the focus will shift to achieve price stability and interest rates will move higher.

Geopolitical tensions will keep volatility at an elevated level in financial markets. Focus on owning income stocks with a visible path to dividend increases and quality growth stocks with strong balance sheets and pricing power.

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TOP PICKS:

Abbott Labs (ABT NYSE)

Abbott is a diversified global healthcare company operating in four segments: Diagnostics, Established Pharmaceuticals, Medical Devices, and Nutrition. Its products are sold in over 160 countries with about 60 per cent of their sales from developed markets and 40 per cent of their sales from emerging markets. ABT has increased its dividend for 50 consecutive years and offers a dividend yield of 1.6 per cent.

Recent purchase $116 range in March 2022  

Fortis (FTS TSX)

Fortis is a North American electric and gas utility company, generating its cash flow primarily from regulated assets with over half its revenues from the U.S. Fortis is a stable cash flow generator, posting 48 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 6 per cent through 2025. Fortis offers a yield of 3.5 per cent.

Recent purchase $54.50 range in October 2020

WSP Global (WSP TSX)

WSP Global provides engineering and design services to clients in the earth and environment (36 per cent of revenues), transportation and infrastructure (34 per cent), property and buildings (19 per cent), resources (7 per cent), power and energy (3 per cent), and industry (1 per cent). Through strategic acquisitions, WSP has expanded its global presence with Canada representing 17 per cent of revenues, Europe/ME/India/Africa 32 per cent, Americas 34, and Asia Pacific 17 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 0.9 per cent.

Recent purchase price $116 range in February 2021

PAST PICKS: March 16, 2021

Apple (AAPL NASD)

• Then: $125.99
• Now: $151.40
• Return: 21%
•  Total Return: 21%

Brookfield Renewable Partners (BEP.UN TSX)

• Then: $52.30
• Now: $50.90
• Return: - 3%
• Total Return: .2%

Johnson and Johnson (JNJ NYSE)

• Then: $161.37
• Now: $173.03
•  Return: 7%
• Total Return: 10%

Total Return Average: 10%