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Brett Girard’s Top Picks: November 22, 2022

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Brett Girard, Chief Financial Officer and Portfolio Manager, Liberty International Investment Management said:

Focus: Global equities


Market Outlook:

Towards the end of the year, the market may continue to struggle over direction. Inflation appears to have peaked, but we are still in the throes of it, at between 6-8% year-on-year. On the employment front, employment remains strong (3.5% unemployment, 10 million vacancies) despite widespread layoffs across the tech sector. In addition, the US Federal Reserve is gaining momentum as it continues to show that financial conditions are too loose and interest rates are rising.

The silver lining of higher interest rates may disprove the idea that equities are the only viable asset class. Interest-bearing securities, especially with a duration greater than 2024, look attractive to income seekers. As for stocks, investors should consider a defensible business model and the ability to generate free cash flow. Companies that excel in these characteristics, especially those with clean balance sheets, are able to respond nimbly to changing macroeconomic conditions and reward shareholders with higher dividends.

When the Federal Reserve declares interest rates high enough, it is very likely that equity valuations will be low and bond yields will drop significantly, resulting in 60% for stocks and 40% for bonds. A “tired” portfolio will have another strong asset. Ten years.

Top Pick:

Brett Girard’s Top Picks

Brett Girard, Chief Financial Officer and Portfolio Manager at Liberty International Investment Management, discusses top picks from Brookfield Asset Management, Alimentation Couche-Tard, and Reckitt Benckiser.

Brookfield Asset Management (BAM.A TSX)

The latest effort to deliver shareholder value separates the asset management side of the business from investments in the company’s balance sheet (because it trades in BN). The goal is to unlock some of the discount applied to smoother fee-related income from lumpy investment income. By purchasing ahead of the spin-off, investors will have the option to retain one or both of the new entities following a potential re-market price.

Alimentation Couche-Tard (ATD TSX)

Over the past five years, operating cash flow increased by 15.4% and dividends increased by 22%. Maintaining the mergers and acquisitions discipline of the last three years should pay off as target valuations drop as private equity sponsors leave the space. Fresh fast food private label products stand to benefit from what consumers feel is a pinch of inflation replacing their food choices.

Reckitt Benckiser (RKT LON)

A staple consumer staple with brands like Lysol, Enfamil and Durex. After a massive write-down of Mead Johnson during COVID, it has turned a corner and now focuses on organic growth. In the first half of 2022, revenue increased his 8.6%, operating margin increased his 290bps, free cash flow increased his 40% and e-commerce channels increased his 19% year over year. Using a stronger Canadian dollar to buy a weaker GBP-based name also leverages potential FX gains should the currency normalize going forward.

Past Picks: November 8, 2021

Brett Girard’s Past Picks

Liberty International Investment Management Chief Financial Officer and Portfolio Manager Brett Girard discusses past choices from Unilever plc, Danaher Corporation and Globus Medical Inc.

Unilever (UL NYSE)

  • After that: $52.81
  • Currently: $48.85
  • Return: -7%
  • Total Return: -4%

Danaher (DHR NYSE)

  • Then: $301.35
  • Currently: $261.58
  • Return: -13%
  • Total Return: -13%

Globus Medical (GMED NYSE)

  • After that: $77.53
  • Currently: $69.01
  • Return: -11%
  • Total Return: -11%

Average total return: -9%











ULNYSE world world world
DHR NYSE world world world
GMED NYSE world world world

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