Gordon Reed, President and CEO, Goodreid Investment Counsel
Focus: American stocks
MARKET PERSPECTIVE:
Financial markets are shaken by the possibility of a recession caused by the actions of the Federal Reserve to control inflation. No one has a crystal ball, so whatever your opinion, understanding that a recession is possible should be a consideration in your investment position.
First, recessions are part of a normal economic cycle, and no matter how destructive they are in the short term, they need to be embedded in our thinking. Second, recessions come in different shapes and sizes. Not every recession comes with the intensity and duration of the 2008 experience. Finally, recessions are not extreme events. New economic expansions are born of recessions and come with exciting opportunities for equity investors.
The number one investment consideration when a possible recession is obvious is quality. In other words, does each holding company in my portfolio have the financial strength to withstand declining revenues and profits? Second, which part of the market withstands recessions best? How do the assessments coincide with historical norms? Are there secular trends that give you confidence that once you emerge from a recession, your stocks will resume their growth trajectory?
The other side of preparing for a recession is creating a risky part of your portfolio. New bull markets have historically marked their origins from the point of “peak” inflation. Making assumptions or group thinking can be costly.
However, making binary bets when investing can lead to poor results, so hedge your risk and accept a return that recognizes the risk management part of an investment plan.
- Sign up for the Market Call Top Picks newsletter at bnnbloomberg.ca/subscribe
- Listen to the Market Call podcast on iHeart or wherever you get your podcasts
TOP CHOICE:
Gordon Reed’s best election
Gordon Reed, President and CEO of Goodreid Investment Counsel, discusses his best choices: Chubb Ltd, Clean Harbors Inc and Alphabet Inc.
Chubb (CB NYSE)
Last purchase in June 2022 for $ 209
Strong pricing trends, sound underwriting results and constructive cost management lead to improved financial performance at Chubb. On the assessment side, this issue is traded at a reasonable 1.3 times the book value, not excessive compared to similar or its own trading history. The highlight here is their bond portfolio, which will take advantage of reinvestment opportunities with higher interest rates.
Clean Ports (CLH NYSE)
Last purchase April 2022 for $ 111
Clean Harbor, owner of Safety Clean, provides environmental and hazardous waste services throughout North America. The business is full of growing demand for disposal services and growing infrastructure projects. Price increases are accepted by CLH’s customer base as inflationary pressures increase, as evidenced by a 20% increase in operating margins over the past few years.
Alphabet (GOOGL NASD)
Last purchase June 2022 at $ 2289
This company is a 20% + producer, top and bottom line, but still trades with a relatively modest 28 times profit for this year. Revenues continue to flow from their advertising business, but look for cloud and their “other bets” businesses that will make a strong contribution in the future. This is only the beginning. Other sources of revenue from the $ 20 billion annual R&D budget are positive symbols.
PREVIOUS ELECTED: June 15, 2021
Gordon Reed’s last election
Gordon Reed, president and CEO of the Goodreid Investment Council, is discussing his previous election: Bank of America, Masonite and Toll Brothers.
Bank of America (BAC NYSE)
- Then: $ 41.39
- Now: $ 35.80
- Return: -14%
- Total return: -11%
Masonite (DOOR NYSE)
- Then: $ 115.52
- Now: $ 92.22
- Return: -20%
- Total return: -20%
Toll Brothers (TOL NYSE)
- Then: $ 58.44
- Now: $ 50.14
- Return: -14%
- Total return: -13%
Total average return: -15%
BAC NYSE Y
nY DOOR NYSE NYY TOL NYSE NYY
Add Comment