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

FOCUS: North American large cap stocks

MARKET OUTLOOK:

This is my 22nd year of investing other people’s money (and my own) and this is the seventh major market pullback of my career, the others being 2001, 2002, 2008, 2015, 2018 and 2020. When you are living through these corrections, it always feels like there is no light at the end of the tunnel and for many, it feels impossible to take no action.

Some see opportunity, others feel pure panic, but one thing is certain, no one knows what will happen in the short term and no one shares the same investment time horizon as you. I believe that many businesses are already trading as if we are in a recession and companies that are more insulated against recessions are the current winners. No question, the Russian invasion of Ukraine as well as renewed shutdowns in China have added complexity to the current market outlook. The central banks are taking the right action to combat inflation.

The news doesn’t have to necessarily improve (although that’s what everyone wants!) for stocks to recover, it just has to be less bad than what is already priced in. We have been advising our clients to take as little action as possible and we believe the best defense is to own a portfolio of high-quality companies that will make it out the other side in a much stronger position. 

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TOP PICKS:

Constellation Software (CSU TSX)

CEO Mark Leonard and the team at Constellation Software has built a compounding machine by acquiring around 700 software companies - and many more to come! Under Leonard’s tutelage, the company has a disciplined approach to capital allocation and has been able to build up a high performing conglomerate of recurring revenues businesses. We are bullish on recent initiatives to expand capital deployment opportunities including for larger acquisitions, venture capital, as well as potential deals in non-software industries. We think shares are attractive trading at 27x forward earnings for a business that should compound earnings at over 20 per cent going forward.

Berkshire Hathaway (BRK.B NYSE)

Berkshire Hathaway is best described as a diversified collection of durable, high-quality businesses with one of the greatest investors in history deploying capital. Buffett’s patient approach to investing has served investors well for decades by maintaining a strong balance sheet and being disciplined on valuations. We believe Berkshire continues to be a safe investment given the current market volatility and Buffett is actively putting cash to work.

Brookfield Infrastructure Partners (BIP.UN TSX)

Brookfield Infrastructure Partners owns and operates a diverse portfolio of infrastructure assets around the world including utilities, railroads, toll-roads, ports, data towers, and pipelines. These are high-quality assets with stable contracted cash flows that are indexed to inflation. BIP has a strong track record of opportunistically asset recycling such as the acquisition of Inter Pipeline in 2021 and has grown cash flow at 15 per cent compounded since 2009. We believe shares are attractive at 13 times cash flow and a 3.5 per cent distribution which is expected to grow each year.

PAST PICKS: May 4, 2020

American Tower (AMT NYSE)

• Then: $236.63
• Now: $240.94
• Return: 2%
• Total Return: 6%

Copart (CPRT NASD)

• Then: $78.00
• Now: $108.16
• Return: 39%
• Total Return: 39%

Meta Platforms (FB NASD)

• Then: $205.26
• Now: $199.63
• Return: -3%
• Total Return: -3%

Total Return Average: 14%