Teal Linde, Manager, Linde Equity Fund
Focus: North American stocks with medium and large capitalization
MARKET PERSPECTIVE:
Our forecast for the end of 2021 pointed out some reasons why we doubt that the S&P 500 can provide a fourth consecutive year of 15% plus return in 2022. We started by recognizing that the bull market, which doubles the historical return, is small likely to continue such a strong performance. We noted that this strong performance has led to very high market ratings (price / earnings ratio above 23 at the beginning of the year) and that with the purchase of assets from the central bank, which is about to end, and interest rates potentially rising, the estimates will have difficulties. is moving higher than the levels since the beginning of the year. We also noted that profit growth is expected to be 9 percent in 2022, driven by higher profit margins, which can also be difficult to achieve.
Since its peak on the second trading day in January, the S&P 500 has lost about a quarter of its value. Interestingly, most of this decline comes from declining estimates. This has brought the price / profit ratio of the S&P 500 to below 17, around the average for decades. Recent price declines have largely addressed appreciation concerns.
Sustainability of profits is now the key issue. Will the recession cause interest rate hikes that central banks are introducing to fight inflation? And if so, how badly can profits shrink? At the moment, analysts do not expect a decline in profits, as the profit forecasts of the S&P 500 for 2022 are about 2% higher now than it should have started the year.
The decline in profits caused by the recession has become a major potential risk to the market. Estimates are now less worrying. As 2022 is on track to deliver the worst performance in the first half of the S&P 500 since 1962, downward market pressures may ease in the second half, with fluctuations focused on economic outlook.
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TOP CHOICE:
The best choices of Teal Linde
Thiel Linde, manager of the Linde Equity Fund, discusses his best choices: National Bank of Canada, Air Canada and Ensign Energy Services.
NATIONAL BANK OF CANADA (NA TSX)
Last purchased on April 20, 2022 for $ 94.75
The National Bank may not be one of the five largest banks in Canada, but its shares have performed best over the past 10, 12 and 15 years, on a calendar year, both on a price-in-price basis and in price and price. dividend. The bank enjoys wide strength in all its business lines. With its overweight exposure to Quebec, the bank also has less relative exposure to the potentially overheated Ontario housing market. Part of the bank’s advantage of being smaller than the top five is its valuation rebate, which allows it to enjoy higher relative dividend yields and the ability to repurchase more shares than its larger, usually more expensive counterparts. . The National Bank also consistently has one of the highest ROEs among Canadian banks. Its shares are now trading at the lower end of the historical valuation range at nine times profit.
AIR CANADA (AC TSX)
Last purchased on November 23, 2020 for $ 21.56
Air Canada’s bookings by the end of May show that net passenger earnings for the 2/22 quarter were 8.8% below the same period in 2019. North American demand is leading the recovery, followed by markets in the Atlantic and beyond this in Asia. Still, while enjoying the strongest revenue improvements since the pandemic, Air Canada shares have recently fallen to 2020 levels as part of the recent stock market crash. Taking advantage of the combination of low capacity and sustained demand, Air Canada shares appear to have been resold and well positioned to recover from stabilizing market sentiment.
ENSIGN ENERGY SERVICES (ESI TSX)
Last purchased on February 7, 2022 for $ 2.25
With higher oil and gas prices, Ensign expects higher use of equipment in its operations in Canada and the United States, which is expected to lead to higher prices per day. Management remains focused on increasing margins above market share. The company is also focused on reducing debt, taking advantage of improved price dynamics with its current relatively short-term price agreements. With oil and gas prices at an eight- and 14-year high, respectively, Ensign is still well below its $ 6 market price of just over three years ago. With the return of energy security to the forefront, Ensign’s prospects are favorable.
PREVIOUS ELECTED: 21 June 2021
Teel Linde’s last election
Thiel Linde, manager of the Linde Equity Fund, discusses his previous choices: Bank of Nova Scotia, Meta Platforms Inc and Linamar.
Bank of Nova Scotia (BNS TSX)
- Then: $ 79.85
- Now: $ 79.97
- Return: 1%
- Total return: 6%
Target (FB NASD)
- Then: $ 332.29
- Now: $ 163.74
- Return: -51%
- Total return: -51%
Linamar (LNR TSX)
- Then: $ 79.18
- Now: $ 54.52
- Return: -31%
- Total return: -30%
Total average return: -25%
BNS TSX YYY FB NASD YYY LNR TSX YYY
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