Lorne Steinberg, president of Lorne Steinberg Wealth Management
Focus: Global value stocks and high-yield bonds

MARKET OUTLOOK

Was it only three months ago when investors were panicking and selling equities? It feels like a lot longer than that as so much has transpired, resulting in the fastest market rebound on record. This rally has been driven by massive fiscal stimulus, unlimited liquidity from central banks and the belief that a COVID-19 vaccine will become a reality by 2021. The economic impact of this recession has been buffered by government support for those most impacted and the focus has shifted to opening up the economy. The Fed is supporting investors and corporations by driving down bond yields and buying corporate debt for the first time.

With long-term yields approaching zero, Austria recently issued a 100-year bond at a yield of less than 1 per cent. Investors seeking yield have little choice but to buy dividend-paying stocks and hope that the economy stabilizes. All of this explains why the stock market appears to be decoupled from the economy. In this environment, we are focused on owning only high-quality companies whose earnings and growth profile support their valuations, as well as maintaining some sideline cash. Chasing over-priced stocks never ends well.

TOP PICKS

Berkshire Hathaway class B (BRK/B NYSE)
Bought June 15, 2020 at $181.26

A number of investors have given up on Warren Buffett & co. after several years of under-performance. However, at the current price, patient investors have a wonderful opportunity to buy an excellent portfolio of public and private businesses at a compelling price. Unlike most of the corporate world, this company has eschewed significant leverage, and has ample liquidity to take advantage of market volatility. At the current valuation there is significant opportunity for above-average performance over the next several years.

Danone SA (BN EPA)
Bought June 11, 2020 at €61.86

Danone is best known as the world’s largest yogurt producer as well as a major player in non-dairy products (Silk brand), bottled water (Evian) and specialized nutrition. The shares have been somewhat impacted by COVID-19, as bottled water consumption has declined. However this excellent company trades at a price-to-earnings (P/E) of 17, with an excellent track record of earnings and dividend growth. It offers very attractive upside at the current price.

ING Groep (ING NYSE)
Bought March 27, 2020 at $5.97

ING is a major European retail bank, boasting a strong capital structure, excellent earnings profile and it’s well positioned in the current environment. European banks have been forced to suspend dividends at present, but we expect dividends to resume next year. At the price, the shares trade at only one half of book value and a P/E of less than 10, representing truly compelling value.

PAST PICKS: AUGUST 15, 2019

Morgan Stanley (MS NYSE)

• Then: $39.10
• Now: $52.13
• Return: 33%
• Total Return: 36%

Royal Dutch Shell (RDS/B NYSE) SOLD June 9, 2020 at $35.38

• Then: $55.09

• Now: $32.72
• Return: -41%
• Total Return: -38%

Hosiden (6804 TYO)

• Then: ¥999.00
• Now: ¥955.00
• Return: -4%
• Total Return: -2%

Total Return Average: -1%

Twitter: @steinbergwealth
Website: www.steinbergwealth.com