Full episode: Market Call for Monday, March 23, 2020
David Baskin, president of Baskin Wealth Management
Focus: North American large caps
Market conditions remain highly unsettled and while there are some signs that volatility is easing, the economic situation is so uncertain that almost anything is possible. We have seen very high-quality companies sold down to bargain basement prices but buyers are reluctant to step forward. Under the circumstances, we're holding on to most of our portfolio positions while considering some opportunistic buys.
BROOKFIELD ASSET MANAGEMENT (BAM/A TSX)
With shares down about 40 per cent from highs, we believe Brookfield is positioned to take advantage of this crisis, having just completed fundraising for several flagship funds with $65 billion in liquidity available for investment. The Oaktree acquisition gives deep expertise in distressed credit providing a buffer, and the low interest rate environment will benefit Brookfield's infrastructure and real estate investments. Leverage is also low, with debt is nearly entirely non-recourse to the specific assets.
NETFLIX (NFLX NASD)
Shares are only down about 12 per cent from highs, but we think Netflix will be a long-term beneficiary from COVID-19. We purchased Netflix shares due to its massive lead in video streaming, which will benefit from the long-term tailwind away from broadcast and cable TV into online streaming. No one is cancelling Netflix today and the disruption in sports and movie theatres will affect cable TV and the traditional distribution ecosystem, allowing players like Netflix and Amazon to sign favorable content deals from competitors who may be less willing to lose money in pursuit of streaming.
MICROSOFT (MSFT NASD)
Microsoft shares are down 31 per cent from the 52-week high. The company should emerge from this crisis as a winner. Usage of products like SharePoint, Office 365, LinkedIn, and Xbox should increase during this time and small businesses will likely recognize the need to have cloud-based collaboration-type software; boosting seat growth. We were bullish on Microsoft's cloud before. It's strong balance sheet ($72 billion net cash) will give Microsoft the opportunity for buybacks or cheaper M&A.