Barry Schwartz, chief investment officer and portfolio manager, Baskin Wealth Management

FOCUS: North American large-cap stocks 

MARKET OUTLOOK:

In 2022, investors were rewarded, (relatively speaking) for avoiding growth-oriented companies whose stock prices would be hurt because of rising rates. In 2023, interest rates continue to rise but the best performers so far this year are those same grow-oriented names. At the end of the day, the companies that can generate sustainable profits and reinvest those profits back into growing their franchises will ultimately deliver the best returns for investors.

We know it is hard, but for investors to be successful over the long term, they must ignore the daily noise and price-driven narratives and really focus on owning a diversified portfolio of reasonably valued businesses that have significant reinvestment opportunities. Interest rates, inflation and the economic outlook will always be changing but our investment approach should never waver. This is the first significant pullback for North American markets this year and we are excited to continue to put our clients’ capital to work in our favourite companies at these levels. For the first time in almost 20 years, corporate bonds now offer a decent absolute return, and we are taking advantage of these opportunities as well.

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TOP PICKS:

Constellation Software (CSU TSX)

Constellation’s stock rarely goes on sale as investors clearly understand its growth opportunities. In its most recent quarter, the company delivered strong organic growth, proof that owning a quality business can protect you from inflation with its pricing power. The company has been extremely active on the acquisition front this year and has been making larger deals. There is no change in our long-term thesis for the company and we believe it can provide our clients with double-digit returns for many years.

Berkshire Hathaway (BRK.B NYSE)

The greatest investor that has ever lived continues to be very active. Warren Buffett has been scooping up bargains in energy as well as Japanese trading companies. Berkshire Hathaway has a gigantic cash balance which is earning good returns now that short-term interest rates pay over five per cent.  In its most recent quarterly earnings release, Berkshire revealed that it generated a record operating income of $10 billion. This is good news for the gigantic cash pile and investors.

Live Nation (LYV NYSE)

The demand for Taylor Swift tickets shows the importance of concerts both to the fan and the artist. Live Nation owns the only competent ticket platform able to handle the distribution of tickets globally for artists and owns and operates the best venues. The company continues to become a dominant global player by acquiring top festivals, venues, and artist relationships to create the best fan experience. We see many years of record results for Live Nation.

PAST PICKS: July 18, 2022

Vail Resorts (MTN NYSE)

• Then: $218.03
• Now: $224.93
• Return: 3%
• Total Return: 7%

American Tower (AMT NYSE)

• Then: $249.25
• Now: $175.53
• Return: -30%
• Total Return: -27%

Microsoft (MSFT NASD)

• Then: $254.25
• Now: $319.47
• Return: 25%
• Total Return: 27%

Total Return Average: 2%