Norman Levine, managing director at Portfolio Management Corp.

Focus: Global stocks

MARKET OUTLOOK:

As the market whipsaw we witnessed earlier this week showed, 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.

TOP PICKS:

Cameco (CCO TSX)

Cameco is one of the largest uranium producers in the world.  Growing global decarbonization initiatives should increase demand for nuclear power, which will be positive for uranium.  The company has a strong balance sheet with more cash than debt.  Over the long-term we expect Cameco to see higher contract pricing for uranium as demand ramps up with new reactors that are currently being built and completed. In addition, the uranium market should slowly improve from current depressed levels, aided by ongoing material production cuts and more recently, ongoing inventory hoarding by various market participants. It is very early in the recovery for uranium, which bodes very well for Cameco over the next few years.

Tourmaline Oil (TOU TSX)

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.

Estee Lauder Companies (EL NYSE)

Estee Lauder is one of the world’s largest manufacturers of prestige makeup, skincare, fragrance and haircare products. The company has many brands, targeting different price points and markets, and has grown largely through acquisitions. Estee Lauder is also a reopening story. Makeup sales decreased sharply as WFH meant women didn’t care so much about their workday appearance and fragrance suffered from people staying at home. Those markets are already rebounding with economies reopening and women returning to the office and going out again.  Skincare, on the other hand, did quite well during WFH. Interestingly, the lockdowns moved a large amount of the company’s sales from department stores to specialty stores and online, bringing with it, higher margins. China’s reopening has brought strong sales gains, which bodes will for other geographies. The company does a large duty-free business, which has suffered enormously with travel restrictions, and this should bounce back strongly, as well, once international travel resumes.

PAST PICKS: June 8, 2020

McDonald’s Corp (MCD NYSE)

• Then: $202.65
• Now: $240.61
• Return: 19%
• Total Return: 22%

Walt Disney (DIS NYSE)

• Then: $127.28
• Now: $174.85
• Return: 37%
• Total Return: 37%

Magna International (MG TSX)

• Then: $63.76
• Now: $100.72
• Return: 58%
• Total Return: 62%

Total Return Average: 40%