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Investors should temper their return expectations in this era of higher inflation, but there’s still good money to be made in select stocks and industries, says Murray Leith, director of investment research at Odlum Brown Ltd.
“I think it will be a lot tougher to see double-digit equity returns in this market environment. High single-digit returns are the new reality,” says Mr. Leith, also executive vice president at the Vancouver-based investment dealer, which oversees about $18-billion in client assets.
Odlum Brown has shifted focus away from U.S. growth stocks, which he says did “very well” for clients in the decade leading up to the last year, to more defensive stocks in sectors such as consumer staples, health care and utilities.
“With the risk of a recession on the horizon, we’re putting more emphasis on less cyclical businesses and those that pay good dividends,” he says. “Just because the economy is slowing down doesn’t mean you can’t make money in the stock market.”
Odlum Brown’s all-equity model portfolio, which includes about 40 to 45 large North American stocks, is up 4 per cent year-to-date and has seen an annual average increase of 13.8 per cent since inception in December 1994. The performance is based on total returns as of June 9 before fees, which vary based on a client’s total invested assets.
The Globe and Mail spoke with Mr. Leith recently about what he’s been buying and selling and a hot technology stock that got away.
Describe your investing style.
We’re patient, long-term investors. We think like business owners and actively encourage our equity analysts to invest alongside our clients in the high-quality businesses we favour. The price we pay for a business matters as much as its underlying quality, and we fear losing money in the long run much more than we worry about missing the excitement in the short term. We struggle to keep up in fast-rising markets but typically lose less in tough environments. That provides more capital to grow and compound during the good times. It’s not sexy, but it’s what yields better results over time.
What’s your take on the current market environment?
I think the economy will continue to slow down. There are reasons to believe inflation might be stickier than some people hope. There’s a housing shortage, labour markets are still very tight, and the world has underinvested in key commodities like oil and gas and the metals needed in the energy transition. That could make it a challenge for authorities to get inflation down to that 2-per-cent target anytime soon.
What have you been buying or adding?
One stock we’ve added to is CAE Inc. CAE-T, the world’s largest manufacturer of pilot simulators. As travel returns to normal after the pandemic, flying has increased, and many pilots need to be trained. So, we think this stock has a nice growth runway.
We also added to our position in Brookfield Renewable Corp. BEPC-T in February. Brookfield is a great business operator, and renewables are a good space to be in, given the ongoing energy transition. We’ve liked the story for a long time but only liked the price once it got cheaper during the recent market correction.
We also recently bought Rogers Communications Inc. RCI-B-T after the share price fell following the deal to buy Shaw Communications Inc. in April. Rogers has some great assets. It has taken on some debt from the deal, but we see it as a solid business and believe its debt will come down. Competition has heated up in the space, but it’s still a cozy oligopoly. We think the stock valuation is quite attractive relative to the other players in the space.
What have you been selling or trimming?
Our portfolio turnover is relatively low. That said, we have modestly reduced our exposure to pricier growth stocks like Apple Inc. AAPL-Q and Microsoft Corp. MSFT-Q. We also took some profits on Tourmaline Oil Corp. TOU-T last fall because the stock had performed so well, and we wanted to scale back our exposure to oil and gas. We still have decent exposure to traditional energy because we see it as an important hedge in a portfolio. We also trimmed a bit of Intact Financial Corp. IFC-T on price appreciation because the stock had outperformed. We still own all of these stocks mentioned.
Name a stock you wished you bought or didn’t sell.
Nvidia Corp. NVDA-Q is a stock we owned years ago during the dot-com bubble and bust. We tripled our money on it back then. It was on our radar again a year ago when the stock dropped after a run-up. We liked the company but were holding out for a cheaper price. That didn’t happen, of course. Nvidia recently released blockbuster results and forecasts, and the stock hit an all-time high. That hurts.
What’s your advice for new investors?
Buy good companies and treat them like you would your home. People would be a lot wealthier if they did that. Most people don’t panic-sell their homes in tough times; they hold on to them through thick and thin. It’s easy to trade in and out of stocks, and we try to counsel people to take a long view with their investments.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
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