Darren Sissons Top Picks: September 16, 2021
FOCUS: global and technology stocks
It has been an interesting 18 month period. In most portfolios, unless moving to a concentrated portfolio format, most managers are or have reduced the risks of some of their biggest winners by reducing overweight positions. The big winner has been the large cap tech companies and names related to semiconductors and the Internet in particular. However, one wonders whether the next 12 to 24 months, which will undoubtedly include a broader economic recovery, will also be favorable to these sectors.
Interest rates are also a conundrum. The US and Canadian central banks have started to gradually reduce their asset purchases, which will gradually lead to higher interest rates. However, consensus and logic suggest that with record debt levels among governments, businesses and consumers, at least for the next two years, interest rate hikes will be modest.
Taxation also deserves forward thinking. Raising taxes is an essential strategy for governments to increase their revenues. While rising house prices have recently synthetically boosted tax revenues, it would be foolish to assume new stealthy taxes, arbitrarily higher taxes on the supposedly rich (earning over $ 100,000 but already being taxed). at the marginal rate of 50 percent) and potentially a new personal housing tax are not a possible headwind for investors for the foreseeable future.
Inflation has also started to rise worryingly. As double vaccination rates rise globally and despite the onslaught of the Delta variant, hospitalizations and deaths of the vaccinated population have plummeted. Therefore, the likelihood of increased demand driven by a return to a more normalized economy is approaching. Given the abundance of liquidity and fiscal support, one wonders whether political missteps will worsen the trajectory of inflation, making it the next major new risk.
Looking away from the half empty glass to the half full glass, investors always have a surprising array of attractive investment choices. The classic, premium quality buying and holding strategy, which offers long-term structural growth coupled with the ability to protect unwanted tax advances, is a natural buy. Disliked businesses temporarily affected by COVID lockdowns offer the promise of significant recovery gains from a COVID exit. Financial services will also see higher interest rates in the future, and at current levels their prices are attractive in many global markets. Finally, mineral raw materials offer an interesting secondary derivative game on the electrification of vehicles and the transition to renewable energies.
Johnson & Johnson (JNJ NYSE)
Last purchase of $ 165.01
A 2.6% dividend aristocrat with 59 consecutive years of dividend increases. Liabilities related to opioids and talc have weighed on stock performance, but recent settlements have significantly reduced that risk. The balance between pharma, devices and the consumer is an added value because it offers three distinct growth engines.
The assessment is not demanding because it does not fully reflect: its COVID vaccine, the additional tuck-in acquisition and the dividend growth profile. The past is generally a good reflection of future performance, that is, dividend growth and total return increased on average annually by 9.2% and 8.6%, respectively, in Canadian dollars over the course of the year. over the past five years.
BHP Group (BHP NYSE)
Last purchase of $ 61.08
The top large-cap miner continues to exhibit a growth dividend profile with a sharp increase in the 2020 dividend.
New CEO Refocuses Company on Growth Initiatives Including Transfer of Energy Assets to Woodside, Portfolio Pruning, Collapse of Double Action Structure and Final Approval of Jansen Potash Mine in Saskatchewan .
2020 was a pivotal year with peak margins and profits, but the forecast is slightly lower, so the valuation is now attractive. Net debt is only $ 4 billion, so a lot of firepower for business initiatives. Lithium is an obvious shortcoming. Has the main commodities needed for renewable energy projects.
Visa (V NYSE)
Last purchase of $ 240.08
The dividend, which currently earns 0.60%, has grown 28% annually since 2008. A beneficiary of the transition from cash payments to digital payments.
A resumption of COVID, as a wider reopening of the economy will lead to increased spending by governments, businesses and consumers and the higher margin travel segment. Expect continued share buybacks, which have averaged 2% since 2016.
A natural beneficiary of inflation, whether or not central bankers view it as “temporary” or choose to officially reflect the real underlying rise in the cost of living.
PAST CHOICES: September 24, 2020
Johnson & Johnson (JNJ NYSE)
- Then: $ 144.67
- Now: $ 166.00
- Return: 15%
- Total efficiency: 18%
Saputo inc. (SAP TSX)
- Then: $ 33.26
- Now: $ 33.77
- Yield: 2%
- Total yield: 4%
Samsung Electronics (SMSN LON)
- Then: $ 1,237.00
- Now: $ 1,625.00
- Efficiency: 31%
- Total efficiency: 36%
Average total return: 19%