Brett Girard, chief financial officer & portfolio manager at Liberty International Investment Management
FOCUS: global stocks
Top Picks: Thermo Fisher Scientific, A O Smith, Halma plc
MARKET OUTLOOK:
Let’s take a quick tour around the major markets we invest in:
Domestically, our federal ministers and provincial leaders are scrambling to prepare for the incoming tariffs. Interestingly, the US$45 billion trade deficit between the U.S. and Canada flips to an American trade surplus of US$45 billion when the flow of energy related goods from Canada to the U.S. is removed. Unemployment, albeit high at 6.7 per cent, looks to be stabilizing. Longer term, we need clarity on immigration and the tax code and maybe a pep talk to remind ourselves that we are home to many world class companies and a highly skilled workforce.
In the U.S., deregulation and tariffs are dominating the news cycle. Only time will tell the long-term directional impacts the recent executive actions will have on gross domestic product (GDP) growth, inflation, interest rates and U.S. dollar strength.
In Europe, the strongest performing markets year to date are France and Germany, after reaching historical oversold levels last year. Europe still has a host of political and economic issues but trades relatively cheap compared to the U.S., even after accounting for historical country premium/discounts.
Through this extreme uncertainty investors should go back to basics and monitor their asset mix and concentration risk while avoiding the knee jerk reactions to trade. Being overweight any sector, geography or theme given the current lack of visibility is ill advised.
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TOP PICKS:
Thermo Fisher Scientific (TMO NYSE)
Last year was a turning point with positive revenue growth and stabilizing margins. While the market initially sold off the name on the back of RFK and his dislike of vaccines, broad deregulation could impact patents and encourage more drug development and commercialization across pharmaceutical companies. Dividends continue to grow with one year, five year and 10-year dividend growth rate at 11 per cent, 21 per cent and 16 per cent, respectively.
A O Smith (AOS NYSE)
Largely domestic (75 per cent sales in U.S.) player in water heaters, boilers and filtration products with greater than 80 per cent of its revenue coming from replacement of current products. With no effective debt on the books, despite revenue growing only five per cent per year over the last 10 years earnings per share (EPS) and free cash flow per share share have grown by 12 per cent and 15 per cent respectively, over the same period.
Halma plc (HLMA LON)
This UK based serial acquirer owns over 50 companies across its safety, environmental and healthcare segments. Since 2021 revenue has grown 51 per cent, profit before tax has grown 42 per cent and return on invested capital has remined steady around 14.5 per cent, and the dividend has grown by 22 per cent, the stock still trades below the 2021 all-time highs.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| TMO | Y | Y | Y |
| AOS | Y | Y | Y |
| HLMA | Y | Y | Y |
PAST PICKS: February 12, 2024
Coloplast A/S (COLO/B CPH)
- Then: 879.80
- DKKNow: 822.40
- DKKReturn: -7%
- Total Return: -4%
Telus (T TSX)
- Then: $23.71
- Now: $20.13
- Return: -15%
- Total Return: -8%
Littelfuse (LFUS NASD)
- Then: US$248.25
- Now: US$239.97
- Return: -3%
- Total Return: -2%
Total Return Average: -5%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| COLO/B CPH | Y | Y | Y |
| T TSX | Y | Y | Y |
| LFUS NASD | Y | Y | Y |
