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

FOCUS: North American large-cap stocks 

MARKET OUTLOOK:

As it turns out, 2023 was a terrific year for stock market investors, and a very good one for investors in bonds. Who knew? Pretty much nobody. Forecasts a year ago showed that about 85 per cent of economists and professional analysts expected a recession in 2023, and the usual mediocre to bad returns that go along with an economic slowdown. Had you listened to the overwhelming majority opinion, you might have sold all your stocks and bonds and gone into cash or guaranteed investment certificates (GICs). You would have missed out. We don’t know what 2024 will bring but we do know that we will remain fully invested for our clients.  

It seems that markets are betting that inflation has been tamed and that central banks will start to lower rates this year. It is unclear when or how fast that will happen, but given the remarkable rise in many North American stocks last year, it is probable that returns will be more modest in 2024.

Our game plan stays the same. Stick with great businesses run by management that knows how to create value. Quality companies are built for good and bad times. In good times, their businesses ride the wave. In bad times, management can invest in their operations and keep or even grow market shares while competitors are challenged.  

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TOP PICKS:

Topicus.com (TOI CVE)

Topicus was spun out of Constellation Software in early 2021. Its goal is to replicate the Constellation approach of acquiring niche software companies across Europe. Topicus has generated faster organic growth than its parent, Constellation Software, and given its smaller base, it has a longer runway of growth given Europe is a fertile ground for software acquisitions. We love that Constellation founder, Mark Leonard, sits on the board of Topicus.   

Brookfield Corporation (BN TSX)

Brookfield Corporation is one of the largest alternative asset managers in the world approaching $1 trillion of fee-bearing capital. The company is well positioned to benefit from many enormous trends including more institutional investments being allocated to alternatives, decarbonization and digitalization. Even though the company has a strong track record it trades at a deep discount to the sum of its parts.  

TFI International (TFII TSX)

Although 2023 was a tough year for the trucking business, this didn’t deter TFI from making significant acquisitions. Its capital-light business model generates lots of free cash flow even in a downturn and management took advantage while others ran into trouble. When the downturn turns to around, TFI will come out even stronger and we think the share price has a serious upside from here.    

PAST PICKS: OCTOBER 27, 2022

Domino’s Pizza (DPZ NYSE)

• Then: US$331.50
• Now: US$412.74
• Return: 24%
• Total Return: 27%

CCL Industries (CCL.B TSX)

• Then: $64.68
• Now: $58.20
• Return: -10%
• Total Return: -8%

Ferrari NV (RACE NYSE)

• Then: US$196.29
• Now: US$332.40
• Return: 69%
• Total Return: 70%

Total Return Average: 30%