Norman Levine's Top Picks
FOCUS: Global stocks
Trying to predict short-term stock market movement is at best a mug’s game. Don’t waste your time. Think long-term. As to that, we believe that as global economies recover from COVID-19 lockdowns (and they are not recovering in a synchronized fashion as many believed they would) earnings, stock prices and, yes, interest rates will be going higher. That doesn’t mean it will be in any ways a guaranteed smooth ride and we expect corrections and pauses along the way as world stock markets have come a very long way since bottoming in March 2020 without more than just a brief pause along the way.
We would not panic and sell during those corrections, when they come, but use them as buying opportunities, especially in areas such as financials, resource and other cyclical stocks. We believe inflation will be higher and longer lasting than the bond market seems to be currently pricing in and we see the demand for and therefore the pricing of many commodities will be stronger than the market currently reflects. As these areas have become relatively small parts of most world indices (due to many years of growth stocks vastly outperforming value stocks) we may see these groups do well while the major indices do not.
Berkshire Hathaway (BRK/B NYSE)
Bought on December 13, 2019 at $225.46
Berkshire Hathaway is the ultimate value stock. It’s operating companies are mainly in insurance, railways, energy, and manufacturing. Value and cyclical stocks underperformed growth and momentum stocks by a wide margin for a number of years until this fall. Value and cyclical stocks are finally starting to act well and Berkshire Hathaway is a great way to play this movement due to its large exposure to financials, industrial, and rails, in addition to a number of technology stocks. The main negative on the stock is the ages of Warren Buffett and Charlie Munger. While the stock will likely suffer in the short term when one or both of them die, the major decision making at the company has been in the hands of others for some time.
Tourmaline Oil (TOU TSX)
Purchased on November 5, 2020 at $18.53 and we continue to buy it for new clients.
Tourmaline is a well-managed oil and natural gas producer, with assets in the Montney, Deep Basin and Charlie Lake areas of British Columbia and Alberta. The Company provides mostly gas exposure (with a growing liquids presence) and owns what we believe to be the best producing and exploration profile of any company in B.C. It’s exposure to the growing California market is second to none and it will be a huge beneficiary when LNG exports from Canada finally begin. Tourmaline combines an excellent land/producing position with a very strong balance sheet and arguably the best management in the business. Natural gas prices look like they are headed higher, and not for just the short-term, and Tourmaline will be one of the prime beneficiaries.
BHP Group (BHP NYSE)
Bought on July 24, 2020 at $52.72
BHP is the world’s largest mining company, based in Australia, whose main products include copper, iron ore, oil and gas, and metallurgical coal. BHP stock has been weak recently for three reasons. First, it announced it was going to get out of the oil business by merging its oil assets with Woodside Petroleum and spin the resultant shares out to shareholders. We agree with this move as we believe BHP will have a higher valuation as a pure mining company. Second, BHP announced formally that it will begin to develop the Jansen potash property, and third, it announced it would delist from London and no longer be part of the FTSE 100 index. I have long been of the belief that the only time investors should have a meaningful exposure to commodity stocks is when the price of the underlying commodities are rising or plateauing for a long time at a high and very profitable level. Metal prices, after a brief period of profit taking, are going up again. That and the sell-off in shares that was related to non-operational issues makes it a good time to buy BHP.
PAST PICKS: March 12, 2020
Enbridge (ENB TSX)
- Then: $35.87
- Now: $49.39
- Return: 38%
- Total Return: 54%
Sanofi (SNY NASD)
- Then: $40.87
- Now: $51.76
- Return: 27%
- Total Return: 36%
Berkshire Hathaway (BRK/B NYSE)
- Then: $175.97
- Now: $285.07
- Return: 62%
- Total Return: 62%
Total Return Average: 51%