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

FOCUS: North American large-cap stocks

MARKET OUTLOOK:

I don’t blame any investor for being nervous in this environment. We are facing slowing growth, a possible recession, rising interest rates and high inflation, which will lead to lower corporate earnings. But here’s the thing, stocks have already reacted to these worries. We are in a bear market in the U.S.; Canada has held up better but only because of its larger weighting to energy. If we use history as our guide, it is probably too late for investors to do anything drastic to their portfolios. Stock prices do not bottom when news improves, they bottom when the news is less bad than what investors expect. 

We think the best defence in these periods is to spend time understanding that you own real businesses, not fluctuating stock prices. Our approach is to own companies that are market share gainers with structural tailwinds that can raise prices at least as much as inflation without a commensurate rise in expenses and those that can snap right back after a downturn. The only thing that is easy in investing is to lose your focus. We will not do that for our clients.

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TOP PICKS:

Vail Resorts (MTN NYSE)

Vail is the largest ski resort operator in North America. Vail has transformed the ski industry by encouraging skiers to purchase season passes for access to their portfolio of world-class properties such as Whistler, Vail, Park City, and more recently in Europe through the acquisition of Andermatt in Switzerland. The stock has sold off 40 per cent due to fears about a recession, but we believe overall demand and profitability will stay strong through a downturn given Vail’s focus on higher-income guests and the relative affordability of skiing. With trading at 23x earnings and a 3.7 per cent dividend yield, we believe shares are cheap.

American Tower (AMT NYSE)

American Tower is one of the largest owners of cell towers in the world. Cell towers are critical infrastructure assets for mobile service providers to upgrade their networks and provide increasingly fast internet speeds, which will flow to American Tower through higher rents. We think American Tower is well positioned through the next few years to capture the upgrade cycle to 5G while providing a defensive stream of inflation-protected cash flow in an economically uncertain time.

Microsoft (MSFT NASD)

Under Chief Executive Officer Satya Nadella, Microsoft has transformed itself into the most dominant enterprise software company with a major position in productivity software, communications, public cloud, developer tools, security, and consumer products. We believe Microsoft’s vast product lineup and strong brand and distribution advantage will lead to more market share gains as its customers increasingly adopt digital technology around the world. Microsoft has also used its relatively low profile to make acquisitions and grow market share.