David Baskin's Top Picks: Oct. 4, 2019

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

MARKET OUTLOOK

There are unmistakable signs of cooling in the world economy, including in the U.S. and Canada. Very weak manufacturing data in the U.S. this week was of particular concern and there seems to be little doubt that world trade wars are having a detrimental impact on economics in Europe, China and North America. The U.S. dollar is at a very high level against other world currencies as a result of higher bond yields in the U.S. market, hurting U.S. exports. We’re also seeing some weaker numbers for employment growth. However, consumer spending remains healthy. On balance, we expect to see a gradual cooling of the North American economy, but do not anticipate a recession in the near future. Any further signs of weakness will likely result in a further easing of monetary policy by the U.S.Federal Reserve Bank, followed shortly thereafter by the Bank of Canada. 

TOP PICKS

BROOKFIELD INFRASTRUCTURE PARTNERS (BIP-U:CT)

Brookfield Infrastructure Partners owns about $66 billion in infrastructure assets around the world, ranging from cell towers in India to toll roads in South America, coal exporting terminals in Australia and railroads in the U.S. The management has done a terrific job of managing the portfolio and the capital structure and continues to recycle capital from mature assets into new opportunities. In 2020, Brookfield Infrastructure will create a new “Corp” structure which allows their distributions to be eligible dividends for Canadian investors. We think the shares are attractive with a distribution yield of over 4 per cent.

AMERICAN TOWER (AMT:UN)

American Tower is one of the largest owners of cellphone towers in the world, owning 171,000 towers in 16 countries around the world. American Tower is a beneficiary of the explosive growth in data consumption: as more data is being consumed, additional equipment must be deployed on cell towers. In emerging markets like India and Africa, smartphones continue to get more powerful, which fuels demand for data and towers as well. American Tower has grown its dividend by 20 per cent since 2012, and we believe this will continue to grow as it builds new sites in international markets. 

VAIL RESORTS (MTN:UN)

Vail is the largest ski-resort operator in the world, with well-known properties such as Whistler, Vail and Breckenridge. There have been no new major ski resorts built in North American over the last 35 years and Vail has spent the last decade building up a high-quality portfolio around the world to increase the value of their season pass, the Epic Pass, which both reduces the seasonality of the cash flows while minimizing the exposure to snowfall in any region. We think there is tremendous pricing opportunity in the Epic Pass over time and that Vail will continue to make smart acquisitions to reinforce their network.

PAST PICKS: NOV. 27, 2018

DELTA AIRLINES (DAL:UN)

• Then: $58.31
• Now: $53.44
• Return: -8%
• Total return: -7%

APPLE (AAPL:UW)

• Then: $174.24
• Now: $224.82
• Return: 29%
• Total return: 31%

TD BANK (TD:CT)

• Then: $71.95
• Now: $73.53
• Return: 2%
• Total return: 5%

Total return average: 10%