Full episode: Market Call for Tuesday, November 12, 2019
Christine Poole, CEO and managing director at GlobeInvest Capital Management
Focus: North American large caps
The strength in stock markets reflects the expectation that a phase 1 U.S.-China trade deal accompanied by a phased tariff rollback will be forthcoming. Recent U.S. economic data has been encouraging with an ongoing resilient U.S. employment situation, a rebound in the services economy and early signs of stabilization in the manufacturing sector. Recession fears have also abated with the steepening of the U.S. Treasury yield curve.
Corporate profits in the third quarter of this year have been stronger than consensus expectations, with earnings per share (EPS) for the S&P 500 companies coming in marginally up year-over-year. Forward earnings guidance suggests this past quarter marks the trough in the rate of earnings growth.
The U.S. Federal Reserve has now cut interest rates three times, demonstrating policy flexibility to all matters that may impact its objectives of maximum employment and stable prices for goods and services. Accommodative monetary policy by central banks globally is supportive for equities.
Going forward, concrete details on a negotiated trade deal as well as confirmation from hard data that global economic growth prospects are improving is required for equities to continue to appreciate.
Recent purchase a $52.90 range in November 2019.
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 4.2 per cent.
MONDELEZ INTERNATIONAL (MDLZ:UN)
Recent purchase price at $52 range in November 2019.
Mondelez is a global snacking company with top category market shares in biscuits, chocolate and candy. Biscuits represent 43 per cent 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, 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
YUM! BRANDS (YUM:UN)
Recent purchase price $98.70 range in November 2019.
Yum! Brands is a global quick-service restaurant operator, with over 48,000 units in 145 countries. Its three iconic brands are KFC (49 per cent of operating profits), Taco Bell (33 per cent) and Pizza Hut (18 per cent). International accounts for 59 per cent of system sales with the balance in the U.S. The latter is a relatively mature market where value and innovation are critical while international markets represent attractive unit growth opportunities. Yum! provides a dividend yield of 1.7 per cent.
PAST PICKS: NOVEMBER 13, 2018
ALGONQUIN POWER (AQN:CT)
- Then: $13.97
- Now: $17.81
- Return: 27%
- Total return: 33%
TD BANK (TD:CT)
- Then: $73.07
- Now: $76.80
- Return: 5%
- Total return: 9%
- Then: $106.94
- Now: $147.39
- Return: 38%
- Total return: 40%
Total return average: 27%