David Baskin, president, Baskin Wealth Management
FOCUS: North American large caps
MARKET OUTLOOK:
The war in Eastern Europe has added a major new uncertainty to the financial markets. The disruption in the flow of commodities such as oil, gas and grains has exacerbated an already difficult situation in regard to supply chains and inflation. The possibility of the conflict escalating into a broader regional war, or even a world war, cannot be ignored.
Until the war in Ukraine is over, we expect markets to continue to be volatile and unsettled. At the same time, the major central banks have been united in their determination to raise interest rates by at least 1.5 per cent by the end of 2022. This has led to fairly sharp losses in the bond market even though the yield curve is essentially flat. The positive point, and the most important one for us, is that corporate earnings continue to be robust. At the end of the day, it is earnings that drive stock prices. For this reason we think that many high-quality companies are now oversold and represent strong buying opportunities.
TOP PICKS:
BlackRock is the largest asset manager in the world with $10 trillion in assets under management. BlackRock has positioned itself as a leader of all major investment industry trends including passive investing, ETFs, ESG investing, and alternatives, which will continue to drive net inflows and AUM growth. We believe BlackRock shares are attractive at just 18x earnings.
Moody’s is a leading credit rating agency, providing ratings for about $5 trillion of annual bond issuances around the world. Despite near-term headwinds given the market volatility and geopolitical issues, there is about $4 trillion in debt issued through the pandemic that will need to be refinanced by 2025, providing a stable source of revenue for Moody’s. Apart from credit risk, Moody’s is also building out strong capabilities to help investors access cyber products, climate related issues, and know-your-client-related risks.
Power Corporation is a holding company mostly consisting of shares in Great-West Life and IGM Financial. Since 2019, Power has taken steps to simplify the corporate structure first by consolidating Power Financial, and more recently by consolidating the China asset management business within IGM Financial. These ongoing moves and capital returns should result in a smaller NAV discount over time, while investors also get a healthy 4.6 per cent dividend yield.
PAST PICKS: June 4, 2021
Granite REIT (GRT-U TSX)
- Then: $79.84
- Now: $97.22
- Return: 21%
- Total Return: 25%
National Bank (NA TSX)
- Then: $92.98
- Now: $101.69
- Return: 9%
- Total Return: 12%
Costco (COST NASD)
- Then: $387.52
- Now: $556.12
- Return: 43%
- Total Return: 44%
Total Return Average: 27%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GRT-U TSX | Y | Y | Y |
| NA TSX | Y | Y | Y |
| COST NASD | Y | Y | Y |
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