Dec 10, 2020

David Baskin's Top Picks: Dec. 10, 2020

BNN Bloomberg

Full episode: Market Call for Thursday, December 10, 2020

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David Baskin, president at Baskin Wealth Management
Focus: North American large caps

MARKET OUTLOOK

The rollout of the COVID-19 vaccine worldwide will lead to a renewal of economic growth starting in the second half of 2021. There has already been a market reaction to the news so we might well see tepid returns in the first half of the year. We are moderately optimistic about the policies of the incoming Biden administration in the U.S. which will lead to a more rational trade policy, reverse the destructive immigration policies of the Trump administration and likely result in substantial infrastructure spending. At the same time, we are seeing very extended valuations in the more speculative sectors of the market and we fully expect a substantial reversion to more rational pricing, which could easily spill over into the broader market. Rotation to the more traditional value sectors may well accelerate in the first half of the year in response to perceived high market prices in the growth sectors.

TOP PICKS

David Baskin's Top Picks

David Baskin, president of Baskin Wealth Management discusses his top picks: Becton Dickinson, Visa and CAPREIT.

Becton Dickinson (BDX NYSE)

Becton Dickinson is one of the largest providers of medical supplies like syringes, catheters and needles in the world and has the scale to offer a full suite of products to hospitals and other healthcare providers. Despite benefitting from COVID testing, Becton Dickinson's stock has slumped in recent months due to the pandemic’s impact on hospital spending and elective procedures as well as regulatory issues regarding the flagship Alaris infusion pump. We believe these are transitory issues and that Becton Dickinson is well positioned from long-term major healthcare trends, including consolidation of healthcare providers. At just 20 times earnings with reasonable leverage, we believe this is a good opportunity to buy a quality company at an attractive price.

Visa (V NYSE)

Despite strong growth in e-commerce sales during COVID, Visa has suffered from the drop in high-margin cross-border travel fees. Nonetheless, we expect Visa's initiatives such as contactless payments and Visa Direct to continue to drive the digitization of money away from cash, which still represents over 50 per cent of payments in many countries around the world. Visa Direct will also allow Visa to gain new flows in B2B, B2C, and G2C.

CAPREIT (CAR-U TSX)

CAPREIT is the largest apartment landlord in Canada and its shares have suffered due to a rent freeze implemented by the Ontario government and concerns over demand from foreign students and occupancy. Nonetheless, CAPREIT's apartments remain one of the most affordable housing options in Toronto and Vancouver with rent controls placing CAPREIT's realized rents significantly below market. Even with the rent freeze, CAPREIT should still be able to realize double-digit rent increases on turnover. We believe that the secular immigration tailwind for Canada will continue after COVID is over and that CAPREIT's stock is a good long-term buy with a 2.75 per cent yield and trading below book value.