Gordon Reid, president and CEO of Goodreid Investment Counsel

FOCUS: U.S. stocks

MARKET OUTLOOK:

We remain adamant in our view that a particularly strong economic recovery is unfolding and providing the fundamental foundation that the current bull market in stocks rests upon and will point to several indicators that bear this out.

Firstly, and most importantly, the job market is recovering, with net new job creation in 10 of the last 11 months creating a cumulative 14 million jobs in the U.S. during this time frame. Skeptics will note that overall employment remains five per cent below prior peaks in the United States, and admittedly, the “man-in-the-street” perception of recession vs. economic expansion likely differs radically from the economics textbook and investment practitioner understanding of these terms. In fact, though, recessions end, and expansions begin when growth resumes – not when economic data surpass their prior peaks, and there is little doubt that markets respond to this framework, rather than the more populist conception of recession and economic growth.

Other important economic indicators have however surpassed their prior peaks, including retail sales, which are now seven per cent above year-end 2019 levels. Housing prices have rocketed to all-time highs and new housing starts are running about 10 per cent above recent trend levels in the U.S. Robust consumer demand has driven commodity prices up a stunning 86 per cent off their year ago lows and back to levels seen at the end of 2019, all while creating supply chain bottlenecks in trucking, rail and most prominently in seaborne freight as the recent grounding of the Ever Given container ship in the Suez Canal brought into focus. 

TOP PICKS:

Chubb (CB NYSE) Latest Purchase Apr 2021 @ $159

Strong pricing trends, healthy underwriting results and constructive cost management are leading to improved financial results at Chubb. On the valuation side this issue trades at a reasonable 1.3 times book value, not excessive when compared to peers or its own trading history.

Dycom Industries (DY NYSE) Latest Purchase Oct 2020 @ $65

Dycom is a telecom services company, capturing a large share of the massive amount of work to upgrade networks to accommodate greater bandwidth. As a part of the US$2.3 trillion infrastructure proposal companies involved in the broadband initiative are getting a lot of attention.

Freeport-McMoRan (FCX NYSE) Latest Purchase Apr 2021 @ $34

Copper demand is up sharply on a cyclical basis as the world exits a synchronized recession. On a secular basis there is evidence of a permanent bump in copper needs as the world moves away from fossil fuels towards electrification. At $4 per pound Freeport-McMoRan is very profitable, especially considering volume growth and unit cost reductions.

AbbVie (ABBV NYSE)

• Then: $90.46
• Now: $107.90
• Return: 19%
• Total Return: 24%

Facebook (FB NASD)

• Then: $210.10
• Now: $312.42
• Return: 49%
• Total Return: 49%

FedEx (FDX NYSE)

• Then: $113.14
• Now: $290.65
• Return: 157%
• Total Return: 160%

Total Return Average: 78%

UPDATES:

DIS NYSE sold April 2020

MCD NYSE sold April 2020

MDLZ NASD sold March 2021

SHW NYSE sold in March 2021

CSCO NASD sold February 2021

Company Website: www.goodreid.com