Brett Girard, portfolio manager and chief financial officer at Liberty International Investment Management

FOCUS: Global stocks

MARKET OUTLOOK:

Both the equity and bond markets are trying to grapple with the uncertainty around COVID variants, inflation and employment rates. Conflicting data released domestically and abroad continues to muddy the water.

In this uncertainty, we advise investors to continue to focus on having a balanced mix of assets to protect a portfolio against a range of positive and negative scenarios. Specifically, within equities, investors should look through base rate revenue growth to consider defensible business models and free cash flow contribution.

Companies strong in these attributes, especially those with a clean balance sheet, can be nimble in a changing macroeconomic environment and reward shareholders with rising dividends.

TOP PICKS:

Lindsay Corp. (LNN NYSE)

Lindsay is a U.S. Industrial small-cap with specialties in irrigation and water management. Surging commodity prices and a heightened focus on domestic food security have increased demand for Lindsay’s irrigation machinery and associated software. Lindsay continues to build cash, pay down debt and has increased the dividend by over 14 per cent over the last 10 years.

Littelfuse (LFUS NASD)

Littelfuse is a U.S. Industrial mid-cap offering fuses switches and sensors through their Automotive, Electronic and Industrial groups. Trends such as increased computerization of cars (both ICE and EV), and rising Internet of Things (IoT) penetration across homes and commercial buildings are strong tailwinds for LIttelfuse products. Their dividend was increased by 10 per cent last month and has grown by 12 per cent p.a. over the last 10 years.

Dassault Systeme (DSY EPA)

Dassault is French software large-cap that provides virtual environments for 3D modelling, simulation, and product development. Their software, offered primarily to Manufacturing, Healthcare and Life Sciences, has high switching costs as it forms the core of a business’s Research and Development efforts. Dassault currently trades at a reasonable (for software) Price to Sales multiple of 12x and is guiding for low double-digit revenue growth for the next five years.

PAST PICKS: July 24, 2020

Stantec (STN TSX)

• Then: $42.37
• Now: $59.09
• Return: 40%
• Total Return: 41%

Nutrien (NTR TSX)

• Then: $44.00
• Now: $79.29
• Return: 80%
• Total Return: 86%

Thermo Fisher Scientific (TMO NYSE)

• Then: $406.38
• Now: $542.87
• Return: 34%
• Total Return: 34%

Total Return Average: 54%