Norman Levine, managing director at Portfolio Management Corp
FOCUS: North American large caps

MARKET OUTLOOK

We have been positioning our portfolios to own stocks that we believe will benefit from the arrival of COVID-19 vaccines and the resultant economic recoveries around the world. Growth and momentum stocks have been the best stock performers for the past few years as interest rates declined to virtually zero and value and cyclical stocks have lagged badly. However, when economies begin to recover back to more normal levels, it will be those stocks left behind that we believe will be leading the markets. These stocks are vastly underweighted in major market indexes so you will probably be seeing indexes such as the S&P 500 and Nasdaq trail or even languish compared to the performance of the average stock. Active management will outperform passive management for the first time in a decade. It will be like the revenge of the nerds.

TOP PICKS

BHP Group (BHP NYSE) Bought on July 24, 2020 at $52.72

BHP is the world’s largest mining company. It’s based in Australia and its main products include copper, iron ore, and metallurgical coal. It is also an oil and gas producer, although it has been reducing its footprint in that area in the past few years. It is potentially a potash producer in Saskatchewan, should the Jansen mine there ever be built. 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 are going up at this time and even oil is showing signs of recovering somewhat. That makes it a good time to own BHP.

Amadeus IT Group (AMADY OTC) Bought on November 10, 2020 at 58.93 euros

Amadeus provides search, pricing, booking, ticketing and other processing services in real-time to travel providers and travel agencies. It also offers software that automates processes such as reservations, inventory management software and departure control systems. Its clients include travel agents, airlines, cruise lines, hotels, tour operators and rail companies. While being a technology company, Amadeus is really a travel company. As such, it is an excellent well-capitalized way of investing in the eventual recovery of the travel industry over the next several years.

Smith & Nephew (SNN NYSE) Bought on September 29, 2020 at $38.70

Smith & Nephew is a British-based medical technologies company. Its main products are: advanced treatments for difficult wound, endoscopy products for minimally invasive surgeries, and orthopaedics – knee and hip implant and trauma products. It was mainly the endoscopy and orthopaedics that were behind our decision to very recently invest in the company. Worldwide, elective surgeries have been postponed or cancelled due to COVID-19 and this has caused demand for Smith & Nephew’s products to decline dramatically. However, the demand has not disappeared but merely been delayed and added to whatever new demand is added every day. Eventually, hospitals will have to deal with the huge backlog for elective surgeries and Smith & Nephew sales and earnings will grow dramatically. In the meantime, we took advantage of its depressed share price to establish a position. The shares have a 2.7 per cent yield.

PAST PICKS: NOV. 8, 2019

Astellas Pharmaceuticals (ALPMY OTC)

• Then: $16.70
• Now: $15.37
• Return: -8%
• Total Return: -7%

Rotork (RTOXF OTC) sold on August 4, 2020 at US $3.725

• Then: $4.26
• Now: $4.21
• Return: -1%
• Total Return:  -1%

BB&T (BBT NYSE) now called Truist Financial (TFC NYSE)

• Then: $54.94
• Now: $48.51
• Return: -12%
• Total Return: -8%

Total Return Average:  -5%

Twitter: @levinepmc
Web: www.portfoliomanagement.ca