Dec 5, 2018
Lorne Steinberg's Top Picks: Dec. 5, 2018
Lorne Steinberg, president of Lorne Steinberg Wealth Management Inc.
Focus: Global value stocks and high-yield bonds
MARKET OUTLOOK
The recent increase in market volatility is less related to politics and has more to do with rising interest rates, equity valuations and where we’re in the business cycle. This has been the longest recovery in the post-WW2 period and it has been driven to a great degree by record-low interest rates.
The era of near-zero rates has ended, valuations in most markets aren’t cheap, and there are signs that the economic recovery is starting to slow. All of this should suggest that markets will remain volatile, which should result in opportunities for those investors with cash to spend.
TOP PICKS
ALLSTATE (ALL.N)
Allstate is one of the best-managed property and casualty insurers in North America with an outstanding track record of revenue, cash flow, earnings and dividend growth. Free cash flow has been used for ongoing dividend increases and significant share buybacks, which should continue. At a price-to-earnings (P/E) of 9, these shares are compelling.
KONINKLIJKE PHILIPS N.V. (PHG.N)
Koninklijke Philips has completed a lengthy restructuring and has emerged as a leading provider of health technology and related products. The strong management team has proven very adept at improving margins and generating revenue growth in its key businesses. We expect double-digit earnings growth over the next few years, with increased free cash flow to be used for acquisitions and dividend growth.
ESPEC CORPORATION (6859.TYO)
Espec is a highly specialized Japanese company which sells environmental test chambers globally. The company has been successful with its global expansion and revenues have grown substantially over the past several years. Earnings and dividends are growing at over 10 per cent yearly and yet like so many Japanese companies, the shares trade at an extremely cheap valuation.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ALL | Y | Y | Y |
| PHG | Y | Y | Y |
| ESPEC | Y | Y | Y |
PAST PICKS: JAN. 30, 2018
ARCONIC (ARNC.N)
- Then: $29.92
- Now: $20.85
- Return: -30%
- Total return: -30%
CORNING (GLW.N)
- Then: $32.33
- Now: $32.15
- Return: -1%
- Total return: 2%
YODOGAWA STEEL (5451.TYO)
- Then: ¥3405.00
- Now: ¥2401.00
- Return: -29%
- Total return: -28%
Total return average: -19%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ARNC | Y | Y | Y |
| GLW | Y | Y | Y |
| YODOGAWA | Y | Y | Y |
FUND PROFILE
Steinberg Global Value Equity Fund
The Steinberg Global Value Equity Fund is a deep value global equity fund focused on investing in companies which trade at a steep discount to their intrinsic value. These companies must meet stringent investment criteria both quantitative and qualitative including financial strength, track record and corporate governance. The fund is well diversified, and risk management criteria includes diversification by industry and geography. With a global value focus, the fund seeks the best values wherever they may be.
Performance as of Oct. 31, 2018
- 1 month: -5.3% fund, -5.6% index
- 1 year: -5.4% fund, -1.8% index
- 3 year: 6.7% fund, 6.3% index
Index: 30% S&P/TSX, 20% S&P 500, 50% EAFE Value.
Returns are based on reinvested dividends. Returns are net of fees.
TOP 5 HOLDINGS AND WEIGHTINGS
- Microsoft: 2.6%
- Cisco Systems: 2.3%
- Morgan Stanley: 2.1%
- Corning Inc: 2.1%
- The Allstate Corporation: 1.9%
TWITTER: @steinbergwealth
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