Christine Poole’s Top Picks: August 12, 2021

MARKET OUTLOOK:

The health concerns surrounding the Delta variant of the coronavirus are offset by higher-than-expected corporate profits and positive earnings revisions. While the increase in the number of cases is worrying, there is a cure available and as such is unlikely to lead to a return to widespread blockages. The strong year-to-date price gains for broad stock indexes have been driven by better earnings, not an expansion in multiples.

As economic conditions improve, central banks will inevitably begin to remove excess liquidity, but at a very gradual pace, with overall monetary policy remaining accommodative. The ongoing recovery in the labor market will offset the expiration of budget support programs. With savings rates remaining at high levels, consumers have shown a willingness to spend as economies reopen.

Business capital spending (CAPEX) is accelerating this year given the strong rebound in corporate profits with a focus on automation, digitalization and the shift to cloud-based applications. Falling borrowing costs, government infrastructure spending and the global shift to green energy are also boosting CAPEX. Finally, restocking depleted stocks will help the economic recovery continue.

BEST CHOICES:

MONDELEZ INTERNATIONAL (MDLZ NASD)

Mondelez is a global snacking company with first-class market shares in cookies, chocolate and candies. Cookies account for 43 percent of sales, chocolate 32 percent, gum and candy 13 percent, cheese and groceries 7 percent, and beverages 5 percent. Its portfolio of leading global brands includes Oreo, beVita, Ritz, Cadbury, Toblerone, Trident, Dentyne and Halls. With nearly 40 percent of its revenue coming from emerging markets, Mondelez is well positioned to benefit from the growing middle class population in these regions. Per capita consumption of confectionery and cookies in developing countries is significantly lower than in developed countries and is expected to increase as personal income levels rise. Mondelez offers investors a dividend yield of 2.3%

VISA (V NYSE)

Visa is a global payments technology company, operating the world’s largest retail electronic payments network and providing financial institutions with a wide range of platforms for consumer credit, debit and prepaid payments. Visa benefits from the current global secular transition from cash / check payments to card and electronic payments. Visa is also a natural beneficiary of the growth in e-commerce / online retail spending. Visa offers a 0.5 percent dividend yield.

ZOETIS (ZTS NYSE)

Zoetis is a world leader in the animal health industry offering therapeutic products for companion animals (55% of sales) and livestock (45% of sales). Operations outside the United States account for 46 percent of revenue, including 21 percent in emerging markets. The company has a diverse, sustainable and innovative portfolio with around 300 product lines covering eight animal species and seven main product categories. Zoetis offers a dividend yield of 0.5%.

PAST CHOICES: August 11, 2020

Alphabet (GOOGL NASD)

• Then: $ 1,480.54
• Now: $ 2,716.70
• Efficiency: 83%
• Total efficiency: 83%

Brookfield Asset Management (BAM / A TSX)

• Then: $ 45.08
• Now: $ 71.77
• Efficiency: 60%
• Total efficiency: 62%

Fortis (FTS TSX)

• Then: $ 53.87
• Now: $ 57.77
• Yield: 7%
• Total yield: 11%

Average total return: 52%