David Driscoll, president and CEO of Liberty International Investment Management Inc.

Focus: Global equities
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MARKET OUTLOOK
I believe we’re at a turning point that is impacting both the stock and bond markets. Bond yields are rising, which may put a damper on stock market returns as bonds historically are half as risky as stocks. If an investor can make similar returns, they often choose to own bonds instead of stocks.

Lately, if a company “beats the street” with its earnings, its shares have risen exponentially, and vice versa. History has shown each decade that as volatility grows, we’re actually closer to the end of the bull market rather than the beginning. However, if President-elect Trump initiates a 15 per cent or 20 per cent U.S. corporate tax, U.S. companies should have more cash to grow and enhance profitability, which may keep the good times going. Unfortunately for Canada, rising U.S. rates and lower U.S. corporate taxes may put downward pressure on the Canadian dollar, create a corporate exodus and speed up the intellectual “brain drain,” meaning investors need to be diversified outside Canada.

From a macro viewpoint, disinflation in many countries still exists (Canada included) thanks to an aging demographic that doesn’t spend as much. Investors, therefore, should first make a plan and stick to it by diversifying among assets classes (stocks, bonds and cash), industries, countries and the sizes of companies. Also, avoid correlation risk (like owning all the Canadian banks instead of one) and concentration risk (too much ownership of one stock), and keep some cash handy in case the market doesn’t meet expectations.

TOP PICKS

STANTEC INC. (STN.TO)
Stantec is an engineering, architecture and related professional services enterprise. It provides an “asset lite” business model that should benefit from infrastructure spending in both Canada and the United States. Profits had been stagnant for the past three quarters before a recent earnings beat. One trend in their favour is that they now have new exposure through acquisitions of water-related construction projects. Last purchase was on September 7 at $31.29 per share.

THERMO FISHER SCIENTIFIC (TMO.N)
Thermo makes analytical instruments, laboratory equipment, software, services, consumables, reagents, chemicals and supplies to pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions and government agencies. Life sciences is a growing industry base and TMO should be in the middle of it. The firm recently purchased a previous Liberty stock, FEI Company, which is a maker of electron microscopes, and we apportioned half of the proceeds to TMO. Last purchase was on September 22 at $157.55.

HALMA PLC (HLMA.LN)
Halma is a health and safety sensor technology group that makes products that detect hazards and also protect assets and people at work in public and commercial buildings. Some products include CO2 detectors, elevator door sensors and water purification testing equipment. The company has consistently grown revenues, profits and dividends on a yearly basis. A drop in the British pound helps their profitability as more than 80 per cent of revenues are outside the U.K. and Europe. Last purchase was on September 8 at GBP10.55.
 

PAST PICKS: AUGUST 25, 2016

FIRST CASH FINANCIAL SERVICES (FCFS.O)

• Then: $51.35
• Now: $49.00
• Return: -4.57%
• TR: -4.18%

NOVOZYMES A/S (NZYMB.DC)

• Then: DKK287.29
• Now: DKK242.00
• Return: -15.76%
• TR: -15.76%

PAYCHEX (PAYX.O)

• Then: $60.73
• Now: $56.30
• Return: -7.29%
• TR: -6.51%

TOTAL RETURN AVERAGE: -8.81%