Christine Poole, CEO and managing director at GlobeInvest Capital Management

FOCUS: North American large cap stocks

MARKET OUTLOOK:

The geopolitical landscape is changing, potentially leading to a realignment of alliances and a restructuring of global trade. No matter how the war in Ukraine ends, it is unlikely the global economy will remain as tightly integrated as it once was.

The supply chain disruptions arising from the global healthcare crisis highlighted the problems that can arise from sourcing goods from far away countries. More recently, the Russia/Ukraine war highlighted the vulnerabilities that come with relying on autocratic countries for key goods and materials. There is a recognition amongst countries and corporations that the lowest cost source may not always be the optimal solution.

The economic impact of this war will vary across geographies depending on a country’s proximity and reliance on Russian exports. From a global perspective, Russia’s GDP is relatively small, only 1.7 per cent of global GDP so an abrupt slowdown of its economy will have minimal direct impact. It is the collateral impact resulting from the associated price spike in associated commodities due to sanctions on Russian exports that will weigh on global economic growth and increase inflation this year. 

North American central banks appear to be satisfied that maximum sustainable employment has been achieved, so now the focus is price stability. Inflation is running significantly above the stated target and is projected to continue to do so through to 2023. Restrictive monetary policy through interest rate increases and quantitative tightening is necessary to assuage both short-term and long-term inflation concerns.

Stock prices track profit growth. The upcoming earnings reports will provide insight into whether expectations for continued growth and stable margins will hold.

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TOP PICKS:

Algonquin Power and Utilities (AQN TSX)

Recent purchase price $19.70 range in April 2022

Algonquin is a North American regulated utility company and provider of diversified clean power generation. The power generated from its wind, hydro and solar facilities are sold under long term contracts. The utilities business provides electricity, natural gas and water transmission and distribution to its customers. Based on its five-year development pipeline of $12.4 billion, Algonquin has targeted a 7-9 per cent earnings per share CAGR over this time period, supportive for continued annual dividend increases. AQN provides a dividend yield of 4.3 per cent.

Microsoft (MSFT NASDAQ)

Recent purchase $286 range in April 2022

Microsoft is global technology company providing software products, support, services, and devices. Its business segments include productivity & business tools, intelligent cloud and more personal computing. Microsoft benefits from widespread consumer adoption of digital tools and corporate adoption and utilization of cloud technology. Its growing recurring revenue stream and strong balance are appealing investment attributes. Microsoft’s dividend yield is 0.9 per cent.

Zoetis (ZTS NYSE)

Recent purchase price $195 range in April 2022

Zoetis is a global leader in the animal health industry offering therapeutics for companion animals (55 per cent of revenues) and livestock (45 per cent of revenues). Operations outside of the United States account for 46 per cent of revenues, including 21 per cent in emerging markets. The company has a diverse, durable, and innovative portfolio with about 300 product lines across eight animal species and within seven major product categories. Zoetis provides a dividend yield of 0.7 per cent.

PAST PICKS: April 15, 2021

Brookfield Asset Management (BAM.A TSX)

• Then: $57.98
• Now: $68.44
• Return: 19%
• Total Return: 20%

Disney (DIS NYSE)

• Then: $185.93
• Now: $133.31
• Return: -28%
• Total Return: -28%

Royal Bank (RY TSX)

• Then: $118.02
• Now: $136.40
• Return: 16%
• Total Return: 19%

Total Return Average: 4%