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

MARKET OUTLOOK

Market performance has been extremely bifurcated between traditional safe-haven value stocks, which have greatly underperformed the recent recovery, and growth stocks, which have in many cases risen to record highs. Very low interest rates have funneled a torrent of new money into equities and much of the money has chased the technology giants, the largest stocks in the world. This week we will see earnings from five of the tech mega-cap stocks and much will depend on both the quality of the earnings and the comments about future prospects. As with many sharp moves in the market, it is likely that value has been oversold and that growth has been overbought, but these are far from normal times and there is no fundamental reason why the current state of affairs might not continue. We do believe that whether buying growth or value, quality of the companies purchased will ultimately determine success of failure.

TOP PICKS

JPMorgan Chase (JPM NYSE)

Banks have been one of the few sectors that have not participated in the rebound. We believe JPMorgan’s prudent lending, strong balance sheet and diversified business model positions it well coming out of COVID. Within the first two quarters, JPMorgan remained profitable even after significant loan losses due to growth in its capital markets and its wealth management franchise and still expects to cover its dividend even if unemployment reaches 22 per cent. Despite significant near-term uncertainty, we think the shares are extremely cheap at 1.2 times book value with a best-in-class management team.

Brookfield Asset Management (BAM/A TSX)

Despite issues in the mall sector, we believe Brookfield Asset Management will be a winner out of COVID as record-low interest rates will continue to drive investor allocations into alternative assets including infrastructure, private equity and distressed debt. Going into the crisis, Brookfield had just completed a round of fundraising and had plenty of liquidity to make investments, especially in distressed debt through Oaktree.

Algonquin Power (AQN TSX)

Algonquin Power is a diversified owner of utilities and renewable energy generation in North America. Most of its business is in regulated utilities in favorable regimes that allow it to earn its allowable return. Algonquin has a strong track record of reliable operations and making investments to reduce customer’s bills. We believe Algonquin is a relatively low-risk way to participate in the growth of the renewable energy space (particularly with the rise of ESG investing) and are happy to hold for a 4.7 per cent dividend yield.

Past Picks: July 30, 2019

Fortis (FTS TSX)

• Then: $52.02
• Now: $53.55
• Return: 3%
• Total Return: 7%

Vail Resorts (MTN NYSE)

• Then: $247.10
• Now: $191.10
• Return: -23%
• Total Return: -21%

Waste Connections (WCN TSX)

• Then: $120.60
• Now: $134.39
• Return: 11%
• Total Return: 12%

Total Return Average: -1%

TWITTER: @davidaskinMWM
WEBSITE: baskinwealth.com