David Driscoll, president and CEO of Liberty International Investment Management
Focus: Global equities

MARKET OUTLOOK

Every three out of four years, buying stocks during October has created above-average returns. That’s because most serious corrections have occurred during September or October. Personally, I prefer Oct. 24, as that date has often been about two weeks after major selloffs and an investor has to let all the sell orders dissipate before stepping into the market. Historically, the S&P 500 Index has returned about 9 per cent returns for calendar January-to-December. For our Liberty stocks, the October-to-October returns have averaged 18.7 per cent, or about double the indexes – something worth considering.

During these tumultuous times, it is important to “mind your portfolio.” This means ensuring that you have:

1. The proper diversification in place by industry, country and size-of-company.
2. Non-correlated assets (only one Canadian bank, not all of them).
3. Dividend growers to provide income growth and to offset inflation. If you trade actively, you give away all your dividend growth.
4. The proper percentage weightings.
5. Little turnover – the more you trade, the more you give away profits to the banks and brokers. In other words, for whose retirement are you saving for, yours or your broker’s? Our stock turnover in each of the past two years has been zero.
6. Don’t chase yield. If the dividend doesn’t grow, inflation can wipe out your income over time. Also, most high-yielding stocks are of poor quality.
7. The right amount of cash (for Liberty clients, it’s 20 per cent times the equity weight).

Regardless of future economic outcomes, a properly diversified portfolio can ride out the storms if we fall into recession or grow faster than the index benchmarks during the good times.

TOP PICKS

HEICO CORP (HEI:UN)

Heico makes aerospace products (parts and electronics) for commercial airlines and the military. Its October-to-October total return since 2008 has been 31 per cent compounded annually. Its dividend growth has averaged 20 per cent compounded annually during that time with eight stock splits.

ENGHOUSE SYSTEMS LTD (ENGH:CT)

Enghouse is a software company for automated mapping, facilities management for utilities and telecoms and geographic information systems. Its October-to-October total return since 2008 has been 31 per cent compounded annually, while its dividends have grown an average of 15 per cent yearly.

ALIMENTATION COUCHE-TARD (ATD/B:CT)

Couche-Tard operates a network of 24-hour convenience stores in North America and Europe. Its October-to-October total return since 2008 has been 31 per cent compounded annually. Its dividend growth has averaged 18 per cent compounded annually during that time with two stock splits.

PAST PICKS: OCT. 12, 2018

A.O. SMITH (AOS:UN)

• Then: $47.76
• Now: $47.99
• Return: 1%
• Total return: 2%

CHUBB LTD. (CB:UN)

• Then: $126.25
• Now: $155.10
• Return: 23%
• Total return: 25%

STERIS PLC (STE:UN)

• Then: $106.10
• Now: $140.68
• Return: 33%
• Total return: 34%

Total return average: 20%