Gordon Reid, President and CEO of Goodreid Investment Counsel
FOCUS: US actions
MARKET OUTLOOK:
Financial markets are plagued by the possibility of a recession caused by Federal Reserve actions to control inflation. No one has a crystal ball, so regardless of your vision, understanding that a recession is a possibility should be a consideration in your investment position.
First, recessions are part of a normal business cycle, and no matter how disruptive they may be in the short term, they need to be incorporated into our thinking. Second, recessions come in different shapes and sizes. Not every recession comes with the ferocity and length of the 2008 experience. Finally, recessions are not terminal events. New economic expansions are born of recessions and have interesting opportunities for equity investors.
The number one investment when a possible recession is evident is quality. In other words, does each share in my portfolio have the financial strength to support a reduction in income and profits? Second, which market share best withstands recessions? How do valuations compare to historical standards? Are there secular trends that give you confidence that when you come out of a recession, your actions will resume a growth trajectory?
The other side of preparing for a recession is creating a risky portion of your portfolio. New bullish markets have historically marked their beginning from the “peak” of inflation. It can be costly to make assumptions or fall into group reflection.
Regardless, betting on investing can lead to poor results, so cover your risk and accept a return that recognizes the risk management part of an investment plan.
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BEST SELECTIONS:
Gordon Reid’s best options
Gordon Reid, President and CEO of Goodreid Investment Counsel, talks about his best options: Chubb Ltd, Clean Harbors Inc and Alphabet Inc.
Chubb (CB NYSE)
Last purchase in June 2022 for $ 209
Strong price trends, good underwriting results and constructive cost management are leading to better financial results at Chubb. In terms of valuation, this issue is quoted at a fair value of 1.3 times in books, not excessive compared to its peers or its own trading history. The best thing here is your bond portfolio, which will benefit because of the reinvestment opportunities as rates go up.
Clean Harbors (CLH NYSE)
Last purchase in April 2022 for $ 111
Clean Harbor, the owner of Safety Clean, provides environmental and hazardous waste services throughout North America. The business portfolio is full as the need for disposal services increases and infrastructure projects increase. Price increases are being accepted by CLH’s customer base as inflationary pressures increase, as evidenced by a 20% increase in operating margins in recent years.
Alphabet (GOOGL NASD)
Last purchase in June 2022 at $ 2289
This company is a producer of 20 percent or more, at the top and bottom level, but is trading at about 28 times relatively modest earnings this year. Revenue continues to be driven by its advertising business, but they are looking for cloud businesses and their “other bets” to be important partners in the future. This is just the beginning. Other sources of revenue from the $ 20 billion annual R&D budget are positive jokes.
PAST SELECTIONS: June 15, 2021
Gordon Reid’s previous election
Gordon Reid, president and CEO of Goodreid Investment Counsel, talks about his previous election: Bank of America, Masonite and Toll Brothers.
Bank of America (NYSE BAC)
- Then: $ 41.39
- Now: $ 35.80
- Yield: -14%
- Total return: -11%
Masonite (NYSE DOOR)
- Then: $ 115.52
- Now: $ 92.22
- Return: -20%
- Total return: -20%
Toll Brothers (TOL NYSE)
- Then: $ 58.44
- Now: $ 50.14
- Yield: -14%
- Total return: -13%
Average total return: -15%
BAC NYSE I
NI DOOR NYSE NII TOL NYSE NII