Full episode: Market Call Tonight for Wednesday, January 29, 2020
Gordon Reid, president and CEO of Goodreid Investment Counsel
Focus: U.S. stocks
The “all-hands-on-deck” issues of just weeks ago (the China trade deal and impeachment) have taken a back seat to the current market risk: The coronavirus. From a market perspective, this is an easy excuse for a garden-variety correction. Of course, the downward pressure is the fear this is more like the Spanish flu of 1918 when the Dow corrected 30 per cent and unlike other viruses that we’ve witnessed in the past couple of decades (SARS, MERS).
- Bank of America sold in March 2019.
- Visa sold in September 2019.
- Waste Management sold in November 2019.
- Walmart sold in November 2019.
HOME DEPOT (HD NYSE)
Latest purchase on January 2020 at $232.
The number of stores Home Depot operates is roughly the same in 2020 as in 2010, yet sales per share have risen from $40 to $100, operating margins are up from 11 per cent to 16 per cent and net margins have doubled. At a 22 times earnings multiple and with an attractive 2.9-per-cent dividend yield, this issue is at a sweet spot in the economic cycle and can be bought.
MCDONALD’S (MCD NYSE)
Latest purchase on January 2020 at $212.
With 38,000 restaurants, 92 per cent of which are franchised, McDonald’s is a cash machine. It’s making money from lucrative lease payments and a revenue stream that’s driven by solid organic growth. Menu innovations and cost-effective automated order/pay systems are driving earnings growth.
UNITED AIRLINES (UAL NASD)
Latest purchase on January 2020 at $81.
The coronavirus scare has put a damper on travel stocks. While there’s added risk, Goodreid draws on past episodes of health scares and concludes that it’s even more imperative to look at company fundamentals. On balance though, United is well operated and inexpensive.
PAST PICKS: FEB. 6, 2019
HOME DEPOT (HD NYSE)
- Then: $184.72
- Now: $234.02
- Return: 27%
- Total return: 30%
FACEBOOK (FB NASD)
- Then: $170.49
- Now: $223.23
- Return: 31%
- Total return: 31%
LENNAR (LEN NYSE)
- Then: $46.08
- Now: $67.78
- Return: 47%
- Total return: 47%
Total return average: 36%
Goodreid North American Balanced Fund
Performance as of Dec. 31, 2019
- 1 year: 14.0% fund, 14.4% index
- 3 years: 7.1% fund, 4.1% index
- 5 years: 6.7% fund,4.2% index
INDEX: Equity Balanced Category Average.
Returns are based on reinvested dividends, net of fees and annualized.
- U.S. equities: 37%
- Canadian equities: 32%
- Canadian fixed income: 19%
- Cash: 12%