MARKET OUTLOOK:

Slower economic growth - What happened to the roaring twenties?

Global inflation-stagflation - We believe it is temporary one-off factors, such as supply bottlenecks, semiconductor shortages, and commodity prices - normal coming out of a period of week growth. As the economy normalizes, we see slower growth, lower inflation and higher savings rates - not unlike the GFC.

We continue to believe that technology, healthcare and healthcare technology, financials, consumer staples and discretionary - Amazon and Costco will continue to do well. 

TOP PICKS:

Stryker (SYK NYSE)
Stryker is one of the world’s leading medical technology companies. The company offers innovative products and services in orthopedics, medical and surgical, neuroethology and spine, and with the acquisition of Wright Medical, will have products for hands and ankles. These products help improve patient and hospital outcomes. The company has 73 per cent of its business in the U.S., 21 per cent is international (developed markets) and 6 per cent in emerging markets. 

Great demographic play as the population ages. Stryker’s product has become more useful and helpful, furthermore, there is somewhat of an annuity with Med Tech products as once surgeons start and learn they tend not to change. 

SYK is a well-diversified company and with its strong balance sheet should be able to manage through any macroeconomic pressures. SYK is generating nearly $3.0B of free cash flow in 2021 of which~25 per cent being used for dividends. This still leaves the majority of SYK's annual free cash flow that could be used for M&A and pay down debt. They cover their interest payments 16x and have a high free cash flow conversion rate.

Walt Disney (DIS NYSE)
The Walt Disney Company, commonly known as Walt Disney or simply Disney, is an American diversified multinational mass media and entertainment conglomerate. The purchase of the Fox assets along with the new streaming services make it one of the best competitors to Netflix. Disney’s film library is by far the best in the industry and spans all age groups. 

From its US$60 billion in revenue - 41 per cent comes from parks, 36.5 per cent from media and the remainder is consumer and studio entertainment. Disney will generate US$9 billion in free cash flow this year. Has high interest coverage and converts 85 per cent of its free cash flow to net income. Its new streaming service, Disney+, has grown rapidly and is a real competitor to Netflix. The parks business continues to show momentum as COVID subsides.
 

Alphabet (GOOGL NASD)
Alphabet is a top search destination on the web and provides a leading search-marketing platform for advertisers and merchants. The company continues to see exceptional growth in YouTube and its ability to monetize advertising.  

The stock trades at 26 times earnings. It will generate US$48 billion in free cash flow in 2021. Has significant secular growth form internet advertising, strong market share in search and other internet advertising segments. 

Google has 30 per cent share of U.S. digital ad revenue and global ad revenue is expected to reach well over US$400B in 2024 and digital advertising accounts for more than 50 per cent of total ad spend. The restrictions that Apple has put on iPhone helps Google.