The financial fallout of Russia’s assault on Ukraine, alongside rising inflation and anticipated rate of interest hikes, is creating extra inventory market uncertainty – without end. For cash supervisor Laura Lau, it’s a great time to go “again to fundamentals,” which she says features a deal with dependable dividend-paying corporations in Canada and the USA.
“In this type of setting, you need some certainty with corporations which might be assured that their earnings are there and that may pay out extra in dividends. That’s the precise type at this level within the cycle,” says Ms. Lau, chief funding officer with Brompton Group in Toronto, who oversees about $2.3-billion of the agency’s $2.7-billion in belongings beneath administration.
“We’re going again to fundamentals – to corporations that assist individuals sleep at night time,” provides Ms. Lau, whose broad-based Brompton International Dividend Development ETF, one of many many funds she oversees, was up by about 23 per cent in 2021.
The Globe and Mail not too long ago spoke with Ms. Lau about what she’s been shopping for and promoting and why she doesn’t advocate shares to family and friends:
What have you ever been shopping for currently?
Earlier than the runup in oil costs, we had been shopping for Imperial Oil IMO-T. We’ve traded out and in of the inventory over time and purchased it again in early February. The basics had been bettering: Persons are driving and flying extra and provide is proscribed. We thought it made sense so as to add some oil publicity. It has lots of money and has been doing inventory buybacks. I’d not add extra proper now, given the surge in oil costs up to now couple of weeks. That would show to be incorrect, however proper now it’s onerous to inform as a result of oil has gone up a lot.
We additionally purchased Archer-Daniels-Midland in early February. It sources, transports and processes agricultural items. We felt that the market was getting tighter. It’s a great, secure identify that has an inexpensive dividend and has been growing it over time.
Fortis is one other inventory we began shopping for in a single fund in mid-December and one other fund in mid-February. It’s a secure utility firm. Final yr, utilities underperformed. A part of the rationale was that buyers had been searching for development names. We needed one thing with a little bit extra stability with the market promoting off – one thing extra defensive. It has a observe file of accelerating dividends for greater than 40 years.
What have you ever been promoting or trimming?
We bought Goldman Sachs GS-N in early February. It was seeing a whole lot of price strain with wages. Goldman Sachs has a tradition of paying individuals properly, which is sweet and dangerous for buyers. We additionally noticed its variety of offers taking place over time, which is among the main methods it makes cash. We additionally bought JPMorgan, one other U.S. monetary identify. We bought these U.S. financials and purchased Canadian banks as an alternative, specifically Toronto-Dominion Financial institution and Financial institution of Nova Scotia. We anticipate the Canadian banks to outperform the U.S. within the close to time period, with fewer price pressures.
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We additionally bought out of Greenback Basic DG-N, the American chain of selection shops. It was extra of a sector name. Discretionary shares have completed very properly through the pandemic and, for us, it made sense to us to take some cash off the desk, particularly given rising inflation.
Title a inventory you want to procure sooner.
I want I purchased Costco COST-Q sooner. We purchased in our low-volatility fund in November final yr, however I want I purchased it in our larger generalist funds. We didn’t as a result of it seemed costly. Costco is all the time costly, for good motive. I remorse it as a result of typically when one thing is dear it will get dearer, which this inventory has.
What’s the most effective inventory you’ve ever purchased?
The most effective inventory we’ve ever purchased is Netherlands-based semiconductor firm ASML ASML-Q. It has a monopoly in its market, which is offering superior semiconductor options. We’ve owned it for greater than 5 years and have benefited from the current provide crunch. [The stock is up more than 350 per cent over the past five years].
What recommendation do you give family and friends with regards to investing?
Begin investing early so you may have the ability of time and compounding in your facet. And keep invested: Don’t let headlines get to you.
What’s the most effective (or worst) inventory market tip you’ve given to a member of the family?
I don’t give inventory tricks to relations. If the inventory goes up, you’re a genius, but when it goes down, they hate you. There’s no upside.
This interview has been edited and condensed.
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