Rick Stuchberry's Top Picks
FOCUS: Canadian large caps and ADRs
The markets are absolutely torn over two possible outcomes - the inflation trade or the deflation trade. In these times of uncertainty, the market seldom goes higher, it will simply sit and wait for more knowledge, and once it knows, it will move.
We think 2022 will have a slow start and that most of the returns will come in the back half of the year and that the inflation numbers will subside as we will be comparing to 2021 not 2020. Once this stability is in place, we should be more comfortable to move higher.
Looking forward into 2022, we will continue to focus the portfolios on capital preservation, growing businesses and blue-chip dividend producers. Buying good businesses is a long-term winning strategy, despite periods of market change and volatility.
During 2021, our growth companies continued to deliver solid revenue growth, and our income companies gave us over 10 dividends hikes in 2021. Many of our large companies are also doing significant share buybacks, reducing the amount of shares available and driving up the price over time.
As for the companies’ safety, very few have any meaningful debt, and many are net debt free and therefore financially more sound than our governments.
Short term, the market is worried about a 2018 reaction to rate hikes, where the market dropped 20 per cent, bottoming on Christmas Eve. Longer term, despite the short-term pain, almost 80 per cent of the time after rate hikes the market continues higher.
Amazon (AMZN NASD)
Amazon’s stock has consolidated at the 3000-3500 level for over a year, while every division continues to see revenue growth. Consumer patterns are forever changed with the pandemic to Amazon’s benefit. AWS has grown significantly and we don’t think it is being recognized by the market. The stock is oversold currently and it is a good long term entry level.
RH (RH NYSE)
The consumer stocks have had a significantly pullback and RH is down over 20 per cent year-to-date. It operates in the premium market and we think it is resilient to inflation, it has just raised significant growth capital and we expect it to continue to do well as higher end consumers continue to form households. Higher-end consumers will be less price conscious and we expect RH to have continued growth.
Disney (DIS NYSE)
The transformation of Walt Disney has been fast forwarded during the pandemic, as Disney+ has quickly surpassed 100-million subscribers. The traditional media and parks businesses have struggled, but are in recovery mode and we expect this recovery to strengthen over time. The dividend was eliminated at the outset of the pandemic and after another few quarters of recovery we expect them to bring back a dividend in the latter half of 2022.
PAST PICKS: January 15, 2020
Tencent Holdings (TCEHY OTC)
- Then: $51.17
- Now: $58.75
- Return: 15%
- Total Return: 19%
ING Bank (ING NYSE)
- Then: $11.78
- Now: $14.21
- Return: 21%
- Total Return: 27%
Cloudera (CLDR NYSE) *Cloudera was acquired in a consortium led by Clayton Dublier and Rice LLC on October 8, 2021.
- Then: $11.52
- Oct. 7, 2021: $15.99
- Return: 39%
- Total Return: 39%
Total Return Average: 28%