Brian Madden's Top Picks: TD Bank, Parex Resources and Restaurant Brands
As we said in March, the economy was placed into something akin to an induced coma to ensure the best possible health outcomes for citizens. Markets have recovered mightily from their mid-March lows largely due to unprecedented monetary and fiscal stimulus. These measures softened the blow of harsh lockdown restrictions and ensured continued functioning of markets and banking.
As leading indicators, stock prices are now signalling a belief that the strategy worked. This may or may not be true, as all prior pandemics have seen secondary outbreaks. Our belief is that investors should always have a primary position in stocks, as timing markets has been repeatedly proven to be sucker’s game.
We have taken a barbell approach, with the cornerstones of our portfolios being long-established, high-quality, profitable and financially strong companies with leadership positions within their industries. The periphery of the portfolio consists of cyclicals leveraged to economic recovery, but nevertheless financially resilient enough to survive a prolonged recession from a second wave. The frenzied speculation in stocks like Hertz, air and cruise lines likely driven by novices and day traders is the antithesis of our approach.
We have weeded stocks with damaged longer-term prospects related to the pandemic and the resultant societal changes out of portfolios. The proceeds from these sales we will redeploy selectively as opportunities arise. Potentially, we may redeploy more aggressively and broadly should a COVID-19 resurgence unfold or if second thoughts about the longer-term consequences of the measures enacted prompt a more sober assessment of companies’ earnings power.Sign up for BNN Bloomberg's new weekly newsletter, Home Economics, which aims to help Canadians navigate their personal finances in the age of social distancing and beyond. Have it delivered to your inbox every Friday by subscribing at https://www.bnnbloomberg.ca/subscribe