David Driscoll

You have to think about what consumer prices are going to look like and how consumers may have to cut back. 2/3 of all economic growth comes from the consumer. If they have to cut back on spending, then chances are that profitability may be weaker in the coming quarters.

His team sets a plan and sticks to it. In a 30-stock portfolio, he'd have about 4 Canadian, 13 US, and 13 international. It's not where the companies are domiciled, it's about where the revenue streams are coming from. 

He's gotten emails over the past weeks about the CAD vs. USD. Important to understand that currency risk becomes benign over a 10 to 20-year time horizon. If you think about the USD vs. CAD, the annual change over 25 years has been 0.2%. With Europe, it's been 0.6%. So don't fret.

His approach is to have a list of stocks, and each client's portfolio is customized with 30 names. They look at the percent weightings in the portfolio. When it comes time to do some buying, they look at the ones with the lightest weight because those are the ones that are down the most. The expectation is that, at some point in time, profits will return and stock prices will turn around and start to go up again.

Stay in the game. Protecting your losses is much more important than how much you make.

The way they manage risk is to not only keep the percent weightings in line, but also to keep 50% in the 4 inelastic industries:  consumer, healthcare, financials, and utilities. The other 50% can go in the more volatile technology or industrial sectors. By country, again, he keeps that 20/40/40 mix among Canada, US, and international. 

He wants to have 50% in large caps, where most of the profits are being used to pay out dividends, and that's the income side of the portfolio. Still wants to have another 40-50% in small-mid caps; that's because more of the profits are going back into the business for capital appreciation over time. This way, you get that nice blend of income and growth. Dividend growth offsets inflation.

He doesn't have to chase sectors or areas because they're global managers. So when EMs and Europe took off, they were already there and benefited from it.

Become differentiated when you drill into the metrics. Both suffering from credit downgrades. Took on a lot of debt for 5G buildout, but weren't able to increase pricing. Number of immigrants has slowed. Lots of price competition, just as elsewhere in the world.

In last quarter, increased dividend. Less risky than BCE right now. Debt/equity ~150%, so not as much onus on debt repayment as for BCE. Has the potential of other operations like TIXT and Telus Health, so it's doing other things outside of just telecom; appears to be promising growth, but we'll see.

In last quarter, BCE cut dividend. Debt/equity is at 200%.

Become differentiated when you drill into the metrics. Both suffering from credit downgrades. Took on a lot of debt for 5G buildout, but weren't able to increase pricing. Number of immigrants has slowed. Lots of price competition, just as elsewhere in the world.

In last quarter, Telus increased dividend. Less risky than BCE right now. Debt/equity ~150%, so not as much onus on debt repayment as for BCE. Has potential of other operations like TIXT and Telus Health, so it's doing other things outside of just telecom; appears to be promising growth, but we'll see.

In last quarter, BCE cut dividend. Debt/equity is at 200%.

Combined ratios for P&C are in the 83% range, amongst the lowest of the group. (For every $1 of policy issued, they pay out only 83 cents in claims.) That 17 cent difference is free cashflow to them, which they invest in a short-medium bond portfolio. Very conservative, pricing has been good.

Because of it size, exposed to more of the catastrophic risk out there. Offsets that by about 90% by buying reinsurance for the policies they write.

Performance YTD is 8%, 10 years is 13%, 15 years is 15% (that should be the target over time). Likes insurance companies a lot more than banks right now, based on what may be coming with interest rates and loan refinancing in Canada and US.

Out of Switzerland, operating globally. 

In the last 3 weeks, stock's fallen a bit due to the trade imbroglio between US and China. About 25% of revenues from China. Indonesia is their biggest revenue maker, and that's why he uses it as a proxy for all of South East Asia. They have their tentacles everywhere. 

Low volatility. With USD falling, emerging market stocks have really done well. So this stock's had a big pickup of 13% YTD. Yield is 5%, which grows roughly 5-10% each year.

US tariffs will hurt its construction and real estate business in China. If China improves, stock should improve. If not, stock will go sideways, and you collect the dividend while you wait.

Stock's rallied simply because of the big selloff when $3B fine was announced. Still in penalty box in US -- can't grow their business there, so where are they going to? Only thing left to buy in Canada is LB, and no one seems to want it because it's mainly commercial mortgages. Wants a bigger footprint in digital, so it's laying off staff.

Don't buy here. US growth overhang could last a number of years. Not a lot of upside.

Seeking new West Coast terminal to export more potash. Prices are just starting to trend a bit higher, which means demand is starting to pick up and supply is going down. Long term, warmer temperatures will mean growing seasons will be more difficult, so fertilizer demand should continue to rise. Yield is 3%.

Understand that commodity prices are always volatile in the short term. Up 27% YTD, 15% over 5 years, but 10 years has been 6%, 15 years has been 10%. So total return over time should be 5-10%. He doesn't offer price targets. 

Sitting on $300B or so of cash. Some of that will have to be used to buy back his shares when Warren does depart. Such a huge conglomerate, that they have to make bigger and bigger acquisitions to move the needle on earnings. And they're not finding those right now.

Over time, you'll probably get a 10% compound annual return. Doesn't own it because unsure what will happen once Warren really leaves or dies.

Banner earnings report. Revenues are growing faster than analysts expected. Into environmental architectural projects, especially in Canada and US. Up 25% YTD. Long-term compound annual return would be ~15%. Right spot, right time.

Supply chains and labour costs. Moving from China to India will still not appease the president. It would take years, not months. iPhone prices would increase substantially. More like a consumer stock, and not introducing anything new to the market. Money from services starting to ebb, margins declining. Fallen 30% from highs last year.

Not a Mag 7 that's in favour right now.

Lenses for glasses and for surgeons doing operations. Up 20% off bottom because earnings have met expectations. Growth will still be reserved because of sales to China, though starting to turn around a bit. Dollar-cost average this one.

Healthcare sector is a big underperformer this year, due to what's going on in the US. If hospitals don't have the funds to buy equipment, that segment will suffer. Small caps globally are suffering, especially with fears of inflation. Will probably flatline for a bit.

Small cap. Earnings coming out June 5, 3 days away. Usually when a company raises dividend by 18%, the expectation is that profits will grow by that much (though he can't speculate). Climbing back since April lows. Margins are good and getting better. Revenues are starting to grow again since Covid. Yield is 4.5%.

He has it in TFSAs, RESPs, and accumulates more over time.

Demand has slowed. Just have to wait for things to turn around. When profits recover, so should the stock price. Serial acquirer. Yield is 4%, grows roughly 7-10% a year, and very attractive at these levels.