Christine Poole, CEO and managing director at GlobeInvest Capital Management
Focus: North American large caps
The direction of equity markets will be influenced by the pace at which economies reopen, the continuation of government assistance programs and the U.S. federal election. After a sharp snapback in economic activity following the lifting of the global lockdown, recent indicators suggest growth is moderating. The inability of businesses in leisure, hospitality and travel industries to operate at capacity means many workers in these sectors remain unemployed, with future hiring intentions largely dependent on the development of an effective vaccine and the inoculation of the general population.
The pandemic has widened the income gap between lower-paid service workers and higher-paid professionals who are generally able to work from home and continue to do so. The latter cohort has accrued more forced savings due to limited spending opportunities. The elevated savings rate represents a source of liquidity to fund pent-up demand when the health crisis is behind us. Many countries have extended government income support programs, including Canada, to soften the impact when debt forbearance expires. The inability in the U.S. to reach a mutually agreed upon fiscal stimulus package to replace the CARES Act is concerning.
The adoption of average inflation targeting framework by the U.S. central bank reinforces an accommodative policy path and near-zero interest rates for years to come. Similarly, in Canada, the Bank of Canada recently affirmed commitment to extraordinary monetary policy support. Investors should be prepared for elevated volatility in the coming months as the likelihood of the U.S. election day evolving into election week(s) grows given the high level of absentee ballots expected to be cast. A contested election may further delay fiscal stimulus measures to support the economy.
Algonquin Power and Utilities (AQN TSX)
Recent purchase price at around $18 on September 2020
Algonquin is a North American regulated utility company and provider of diversified clean power generation. The power generated from its wind, hydro and solar facilities are sold under long0term contracts. The utilities business accounts for 85 per cent of revenues and provides electricity, natural gas and water transmission and distribution to its customers. Based on its development pipeline, Algonquin has targeted 10 per cent annual dividend growth until 2021. Algonquin provides a dividend yield of 4.5 per cent.
Johnson & Johnson (JNJ NYSE)
Recent purchase price at around $148 on September 2020
Johnson & Johnson is a global diversified healthcare company, manufacturing a broad range of products within three segments: Pharmaceuticals (51 per cent of sales), medical devices (32 per cent) and consumer health (17 per cent). Approximately 70 per cent of sales are derived from products that have a no. 1 or 2 global share. It offers consistent stable earnings and dividend growth. One of a few triple A-rated companies left in North America, it has increased its dividend for 58 consecutive years and offers investors a dividend yield of 2.7 per cent.
Loblaw (L TSX)
Recent purchase price at $67 range on September 2020
Loblaw is Canada’s largest grocery retailer offering consumers multiple banners and through Shoppers Drug Mart, the leading national drugstore operator. Digital retail initiatives include its PC Express “click and collect” and home delivery through Instacart. Its scale, locations, extensive private label offering and PC Optimum loyalty program are advantaged assets within a highly competitive industry. Loblaw provides a current yield of 1.8 per cent.
Past Picks: September 12, 2019
Abbott Labs (ABT NYSE)
- Then: $85.21
- Now: $107.08
- Return: 26%
- Total Return: 28%
Pembina Pipelines (PPL TSX)
- Then: $48.80
- Now: $32.07
- Return: -34%
- Total Return: -30%
Unilever (UL NYSE)
- Then: $61.67
- Now: $62.86
- Return: 2%
- Total Return: 5%
Total Return Average: 1%