Mark Grammer, managing director and portfolio manager at Gluskin Sheff + Associates
Focus: Global equities

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MARKET OUTLOOK

We see the global economy in sync, however, the Fed is in a tightening mode and the U.S. Treasury curve is flattening. We don’t see the economic expansion ending in the near term, but we’re concerned that higher volatility will be the norm for the stock market going forward as strains emerge from the tightening in the central banks. We’re looking for some mean reversion in the coming year, which could put pressure on the tech stocks in particular. We’re positioning our portfolio to be mindful of heightened risk, bolstering the quality of the portfolio and focusing on strong balance sheets, minimal refinancing risk and companies with high earnings visibility and predictability.  We feel active management will provide significant outperformance over passive.

TOP PICKS

PERSOL HOLDINGS (2181 TYO)

We recently met management and feel very comfortable holding this name. The job offer-to-applicant ratio continues to rise, making it more necessary for companies to employ HR firms to fill their human resource needs. Persol is the second-biggest player in this space in Japan and has a very strong network of temporary staff. The company is focusing on the more profitable recruitment market and we expect this to have a positive impact on margins.

BAYERISCHE MOTOREN WERKE (BMW ETR)

While we appreciate that we’re in the late stages of the economic cycle, BMW is priced as if the cycle has already rolled over. It demonstrates some of the highest margins in the auto industry. It has a large-scale operation in the U.S., which we believe should insulate it from tariffs should President Trump apply them to the foreign auto makers. It’s entering a robust period for model refreshes, particularly in the hot SUV segment. China is growing very well for BMW and they seem to be gaining market share.

TRAVELSKY TECHNOLOGY (696 HKG)

The company provides the global distribution system for China’s air travel and tourism industries. Given the growth in tourism in China, we believe TravelSky is ideally suited to demonstrate long-term sustainable and superior growth. It has a pristine balance sheet, with virtually no debt and healthy free cash flow generation.

PAST PICKS:  APRIL 20, 2017

PERSOL HOLDINGS (2181 TYO)

• Then: ¥1995
• Now: ¥3015
• Return: 51.12%
• Total return: 51.66%

KASIKORNBANK PCL (KBANK BKK)

• Then: ฿188.50
• Now: ฿220
• Return: 16.71%
• Total return: 16.98%

LVMH – MOËT HENNESSY LOUIS VUITTON (MC EPA)

• Then: €207.40
• Now: €247.25
• Return: 19.21%
• Total return: 19.98%

Total return average: 29.54%

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