Norman Levine, managing director at Portfolio Management Corp
Focus: North American large caps

MARKET OUTLOOK

We've been carrying an above-average amount of cash since the fall of 2018 as we thought that world economies would slow and that markets would follow suit. We've been part right. Yes, world economies have slowed and are expected to continue slowing for the near future. In the fourth quarter, stocks took a brutal dive based on that slowing and sharply declining interest rates, which were foreshadowing slower growth.  However, so far in 2019, markets around the world have reversed and have recovered all their previous losses despite no improvement in the economy or any increase in interest rates, which would foreshadow a more favourable economic outlook. In addition, corporate profits are expected to have a tough time showing much meaningful growth this year. For those reasons, we will continue to carry more cash than normal but are looking for opportunities when they present themselves.

TOP PICKS

CCL INDUSTRIES (CCLb.TO)

We've owned the stock for a very long time and continue to buy it for new clients. CCL is a Canadian multinational packaging company and is the world’s largest converter of pressure-sensitive labels with operations in 167 facilities around the world. It’s customers are the world’s leading consumer products, automotive, electronic, healthcare and chemical companies. CCL builds plants where its customers build plants. It has grown by acquisition but its two latest acquisitions, Checkpoint (POS tags) and Innova (polymer currencies) have not performed as expected and it has caused earnings to disappoint over the past two years. It now appears earning are now improving in these areas and the stock is poised to return to its growth pattern. CCL currently yields 1.1 per cent and increases its dividend regularly.

ROTORK (ROR LON)

Bought on Dec. 8, 2015 at 180 pence or U.S.$2.751.

Rotork is a British company and is the world’s leading provider of electric valve actuators and network control systems. It also manufactures gears and gearboxes for the international valve industry, flow and pressure control and measurement instruments, and pneumatic, hydraulic and electro-hydraulic actuators and control systems. It is asset-light as it subcontracts most of its manufacturing. This makes it a high-margin company. Its biggest customer is the oil and gas industry, both upstream and downstream. The company has a new president who's working to reduce costs and increase margins by increasing sales and reducing the company’s bloated headcount, the result of many small acquisitions in the past few years. Rotork yields 2 per cent.

JOHNSON & JOHNSON (JNJ.N)
Bought on May 17, 2019 at $138.45

Johnson & Johnson is one of the largest and most diversified healthcare businesses in the world, with over 250 operating companies encompassing a broad range of products across the healthcare field. The company's worldwide business is divided into three main segments: Medical devices  and diagnostics ( about 37 per cent of sales), pharmaceutical ( about 43 per cent), and consumer ( about 20 per cent). Sentiment against healthcare stocks is currently quite negative, something that has caught our attention, as previous bouts of negativity towards the group (especially political negativity) have proven to provide excellent buying opportunities over time. J&J has been hurt by the controversy and litigation over its talc business (Johnson’s Baby Powder). We believe that's already in the stock. What we are looking forward to is new drug approvals beginning in 2020 and the fact that it does not face any type of patent cliff for some time. J&J yields 2.75 per cent.

PAST PICKS: MAY 29, 2018

CELESTICA (CLS.TO)

• Then: $15.60
• Now: $9.42
• Return: -40%
• Total Return: -40%

OPEN TEXT (OTEX.TO)

• Then: $44.51
• Now: $55.02
• Return: 24%
• Total Return: 26%

BB&T CORP (BBT.N)

• Then: $52.47
• Now: $48.47
• Return: -8%
• Total Return: -5%

TOTAL RETURN: -6%

TWITTER: @levinepmc
www.portfoliomanagement.ca