Darren Sissons’ Top Picks: August 24, 2022 – BNN Bloomberg

Darren Sissons, Vice President and Partner, Campbell, Lee & Ross

FOCUS: Global and technology equities


MARKET OUTLOOK:

The markets have entered a period of heightened volatility that will continue for the foreseeable future. This spike in volatility created both significant pressure on the portfolio and attractive opportunities for new investments.

The first half of 2022 was dominated by interest rate policy announcements and commodities, which collectively drove the market down considerably. The bear market reversal, which occurs when market direction changes in a bear market from falling to rising prices, has eliminated much of this decline in the first half of 2022. However, interest rates continue rise and September should see higher interest rates in the United States and Canada. Interest rates are also rising around the world as central banks coordinate rates higher. The onset of quantitative tightening, which is the opposite of quantitative easing, also known as money printing, began in June 2022. It will gradually drain liquidity from markets, creating downward pressure on valuations . Likewise, the conflict in Ukraine, which has triggered global concern over energy, remains an ongoing concern. Overall, the underlying drivers of risk aversion in the first half of 2022 remain elevated and a market retracement is likely. Defensive positioning of the portfolio is therefore essential in the short term, as is a liquidity cushion

Although the risk remains high, the liquidation has generated a plethora of attractive investment opportunities. Commodities are a net beneficiary of inflation and will continue to reward investors until it is brought under control. Energy, a subclass of commodities, looks attractively priced at current levels, especially given continued Russian supply constraints and the likelihood of a cold European winter. Regionally, the United States is expensive, as is the US dollar, but European and Asian companies are cheaply priced because they have a high political risk discount, just like their currencies.

Given the above and as mentioned in previous appearances, investors should review their risk management protocols and refine them if necessary. Prune underperforming investments, consider taking profits on successful investments and raise funds. Investors need to recognize that the risks are high and position themselves accordingly. However, they should also keep in mind that market sell-offs create excellent entry levels to lock in long-term core holdings at attractive prices. Perhaps most importantly, investors should be aware of the phrase, you make money when you buy, not when you sell.

  • Sign up for the Market Call Top Picks newsletter at bnnbloomberg.ca/subscribe
  • Listen to the Market Call podcast on iHeartor wherever you get your podcasts

TOP CHOICES:

Darren Sissons’ Top Picks

Darren Sissons, vice president and partner at Campbell, Lee & Ross, talks about his top picks: Auckland Airport, Chocoladefabriken Lindt & Spruengli AG and Shell Plc.

Auckland Airport (AIA NZX)

1) New Zealand has fully reopened since the COVID-19 lockdown to international markets in June 2022. 2) Passenger volume in June was up 145% month-on-month. 3) The revenge trade will continue. 4) Domestic and international airlines have announced a host of new routes to and from Auckland. 5) Operating leverage associated with higher passenger volumes will drive higher profitability through parking, retail and hotels. 6) Redevelopment plans largely halted during the COVID-19 lockdown will restart, including a new runway and other expansion additions to meet growing demand. 7) The American ADR ticker is AUKNY.

Chocolate factory Lindt & Spruengli AG (LISP SWX)

1) A growing dividend that currently yields 1.1%. 2) An asset-light business model that requires little capital to grow. 3) Confectionery is a growing industry linked to rising incomes. 4) With rising inflation and expected economic hardship in 2023, small luxuries will provide consumers with affordable treats. 5) Strong balance sheet. 6) Lindt’s pension plan owns 21% of the company. 7) A consistent long-term return as the total return in Canadian dollars increased by an average of 12.7% and 16.6% per year over the five and 10 year periods, respectively.

Shell Plc (SHEL NYSE)

1) An attractive growth dividend currently yielding 3.7%. 2) US$19 billion in share buybacks for 2022. 3) The balance sheet is rapidly deleveraging. All other things being equal, Shell will be net debt free by 2024. 4) A renewable energy hub that offers an option. 5) Given its strong balance sheet and high free cash flow, Shell provides a suitable platform to ride out inflation and energy-related political risks.

AIA NZX Yes Yes Yes
LISP Yes Yes Yes
SHELL NYSE Yes NOT Yes

PAST CHOICES: September 16, 2021

Darren Sissons past picks

Darren Sissons, vice president and partner at Campbell, Lee & Ross, discusses his past picks: Johnson & Johnson, BHP Group and Visa.

Johnson & Johnson (JNJ NYSE)

  • So: $165.22
  • Now: $165.44
  • Yield: 0.1%
  • Total return: 3%

BHP Group (BHP NYSE)

  • So: $58.11
  • Now: $58.19
  • Return: 12%
  • Total return: 18%

Visa (V NYSE)

  • So: $224.33
  • Now: $206.38
  • Yield: -8%
  • Total return: -7%

Average total return: 5%

JNJ NYSE Yes Yes Yes
BHP NYSE Yes Yes Yes
V NYSE Yes Yes Yes


#Darren #Sissons #Top #Picks #August #BNN #Bloomberg

Leave a Comment