David Baskin, president of Baskin Wealth Management

Focus: North American large caps

MARKET OUTLOOK:

In spite of the significant recovery in the markets from one year ago, we believe there are still excellent companies which can be invested in at current price levels. This includes sectors as diverse as big technology, finance and retail. We are cognizant of increases in commodity prices but we are not overly concerned about inflation once supply chains get back to normal. However, we do think it is very likely that interest rates will be higher a year from now, making this a factor in all investment decisions. We are quite encouraged by the earnings report for the last quarter and expect to see increasing momentum as economies reopen in North America and Europe.

TOP PICKS:

Granite REIT (GRT-U TSX)

P/AFFO: 21x       Price/Book: 1.23x       Distribution Yield: 3.7%

Granite REIT is an owner of industrial properties and warehouses in North America and Europe. The growth of e-commerce has led to strong demand for distribution centers, and we believe supply has not correspondingly grown which should lead to rent growth. Granite is well positioned to benefit from these trends and owns properties that are conveniently located to major transportation hubs and large populations with a healthy development pipeline that will continue to drive growth. Relative to other REITs, Granite is significantly under-levered at just 25 per cent which we believe can be increased over time. 

National Bank (NA TSX)

P/E: 11.5x        Price/Book: 2x        Distribution Yield: 3%

We believe Canadian banks overall are well positioned for the post-COVID recovery, and will benefit from strong loan growth, consumer spending growth, and rising interest rates, while experiencing low loan losses. National Bank in particular has a large exposure to Quebec, which has healthier economic fundamentals than other provinces with more affordable housing prices, and lower household debt levels. We believe that at 11.5x earnings and a three per cent dividend yield, shares are attractively priced.

Costco (COST NASD)

P/E: 34x      EV/EBITDA: 19x      Dividend Yield: 0.8%

Costco benefited significantly from the COVID pandemic as an essential retailer of food and supplies and should continue their growth after COVID. We believe that Costco's reputation for low-prices and high-quality goods will become increasingly valuable in an inflationary world with grocery delivery apps and Amazon third-party marketplace. Costco has also been building out its e-commerce capabilities which will allow it to gain share in large goods such as appliances and furniture. Lastly, Costco has a long runway to open stores internationally including China. Despite the optically high P/E, Costco has a long runway of reinvestment opportunities and shares are reasonably priced.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
 GRT-U TSX  N N  Y 
 NA TSX  Y Y  Y 
 COST NASD  Y Y  Y 

 

PAST PICKS: July 28, 2020

David Baskin's Past Picks

David Baskin, president of Baskin Wealth Management, discusses his past picks: JPMorgan Chase, Brookfield Asset Management, and Algonquin Power & Utilities Corp.

JPMorgan Chase & Co. (JPM NYSE)

  • Then: $97.32
  • Now: $165.90
  • Return: 70%
  • Total Return: 74%

Brookfield Asset Management (BAM/A TSX)

  • Then: $45.53
  • Now: $60.89
  • Return: 34%
  • Total Return: 35%

Algonquin Power (AQN TSX)

  • Then: $18.04
  • Now: $18.70
  • Return: 4%
  • Total Return: 7%

Total Return Average: 39%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
 JPM NYSE Y  Y  Y 
 BAM/A TSX Y  Y  Y 
 AQN TSX N  N  Y 

 

Personal Twitter Handle: @DAVIDPBASKINBWM

Company Website:  BASKINWEALTH.COM