Christine Poole's Top Picks
Christine Poole, CEO and managing director at GlobeInvest Capital Management
Focus: North American large caps
The current economic cycle is the longest as well as the slowest one on record, driven in part by unprecedented monetary stimulus by central banks around the world.
The divergence between the health of the manufacturing and services sectors is widening. Manufacturing activity in the U.S. had been holding up relatively well, but in recent months has succumbed to the global trend of contracting activity. Undoubtedly, rising trade tensions and a weaker global trade flow have been and continue to be primary drivers of a decelerating industrial economy. The grounding of Boeing’s 737 Max since March and more recently the United Auto Workers strike against General Motors are also weighing on manufacturing activity. The services sector in the U.S., which contributes close to 70 per cent of GDP, continues to grow albeit the rate of growth appears to have softened recently.
The other key indicators we track to assess the health of the economy such as the labour market, credit trends and high-yield credit spreads remain relatively solid. In addition, an accommodative global monetary policy by central banks should provide some downside protection for stock markets.
The prolonged trade war between the U.S. and China remains the largest risk for markets, on both the upside and downside. At this juncture, we believe a cessation of additional and/or higher tariffs and commitment to ongoing discussions would be considered a temporary “truce” and greeted positively by investors.
While some of the economic indicators we track have weakened since last quarter, they do not yet point to a broad-based economic downturn.
BROOKFIELD ASSET MANAGEMENT (BAM/A:CT)
Recent purchase price $68 range in October 2019.
Brookfield is a global alternative asset manager with approximately $300 billion in assets under management. The company owns and operates assets on behalf of shareholders and clients with a focus on property, renewables, infrastructure and private equity. Brookfield seeks to invest in long-life, physical assets that typically benefit from some form of barrier to entry, regulatory regime or competitive advantage, providing for relatively stable cash flow streams. The stock offers a modest dividend yield of 1.3 per cent.
Recent purchase price $130 range in October 2019.
Disney is a media conglomerate and premier content provider, comprised of media networks (41 per cent of revenues), parks and resorts (34 per cent), studio entertainment (17 per cent) and consumer products (8 per cent). Its strong global brand portfolio includes Disney, ESPN, Pixar, Marvel and Lucasfilm and supports a multi-platform strategy that exploits content and intellectual property across its business segments. The acquisition of 21st Century Fox significantly enhances Disney’s content offering and distribution capabilities. The November 2019 launch of Disney+, its direct to consumer streaming service, marks a new growth path for the company. Disney provides a dividend yield of 1.3 per cent.
Recent purchase price $75 range in October 2019.
Xylem is a leading provider of water equipment and services and operates in three segments: water infrastructure (transportation, treatment and testing of water), applied water (usage in various industries) and measurement and control solutions. The company benefits from the global water industry growth drivers of quality, scarcity and safety. Its end markets include the industrial, public utility, commercial, residential and agricultural sectors. Xylem is geographically diversified, with the U.S representing 46 per cent of revenues; Europe, 28 per cent; Asia Pacific, 13 per cent; and the rest of world, 13 per cent. Within emerging markets (21 per cent of its revenues), many regions are still building out their basic water infrastructure systems, while in developed markets maintenance and replacement of aging systems is the demand driver. Xylem provides a dividend yield of 1.3 per cent.
PAST PICKS: OCT. 10, 2018
- Then: $71.64
- Now: $65.75
- Return: -8%
- Total return: -5%
- Then: $1,092.16
- Now: $1,202.40
- Return: 10%
- Total return: 10%
BROOKFIELD ASSET MANAGEMENT (BAM/A:CT)
- Then: $54.96
- Now: $68.95
- Return: 25%
- Total return: 27%
Total return average: 11%