Barry Schwartz

Outlook for 2023. Remember the movie Men in Black, where they wipe the year clean? That's what he hopes will happen with the market as well, where you start the year on a fresh note. There are a lot of positives. For short-term investors, you can now buy a GIC at 5% for 1 year. The last time that happened, he had a full head of hair. Cash is paying 4% in high-interest savings. Short-term bonds have 5% yields. Dividend payers are now offering 4-5-6%. Some of the world's greatest businesses were marked down 30-40-50% in 2022. Let's focus on the opportunities for 2023. If you're a longer-term focused investor, the setup for 2023 looks pretty good.

Inflation. The sad thing was that the fundamentals in 2022 were great. We got punished because of rising interest rates, not because of bad fundamental data from corporate profits or dividend increases. The natural inclination is, that if we're heading into a slowdown or recession for 2023, won't the stock market be lousy? The market was already lousy in 2022 when we had good results, so maybe in 2023 when we have not so good results, the stock market will anticipate the recovery that will eventually happen. Hopefully, future problems have already been priced in to the stock market today.

Interest rates. No one knows whether rates are going to stay high. We've had the fastest rate hikes we've ever seen. If things worsen, and they can worsen pretty quickly, they'll be cutting rates by the end of 2023. Inflation is dead, it's peaked, it's over. You can see this when you look at hard goods and commodities. The last holdouts are rents and healthcare services, but these will start to roll over. He expects a pause very shortly, and then probably rate cuts at the end of 2023. If the message for 2022 was don't fight the Fed, the message for 2023 will be don't fight the Fed on the way down as they start to pivot and start to prop up the economy. That doesn't mean stocks will do badly, in fact just the opposite.

Bloomberg Commodity Index peaked in early June at 136, but is now barely above 100. Tells you that the worldwide economy is slowing down materially. Not slowing down as much as the stock market wants, as jobs are still very sticky. Job openings in the US are still dramatically higher. No matter what country you go to, there are still too many jobs to be filled. It will just take some time for interest rates and some of the weakness to filter in. We need bad news for the stock market to go up, but be careful what you wish for.

Too many good shows on competing streaming services. Kids don't go to a movie every Friday the way he used to. Doesn't know what the catalyst is. Dividend gone. Balance sheet probably not in good shape, pandemic did lots of damage. All depends on quality of movies. Media companies all losing money. No growth tailwinds over the next 5 years.

Downside with acquisition of Figma? Subscription software. Anyone in media, advertising, or publishing has to use their products. Facing competition. Many think overpaid for Figma. Deal still needs DOJ approval. Fabulous outlook from earnings in December, company anticipates double-digit growth for many years. Perfect balance sheet. Big tech is attractive.

As long as it can continue to make acquisitions, you'll see fabulous growth. Plans to spin off smaller divisions, and the strategy is to get growth in each. One of the best performers on the TSX, no reason for that to slow.

Growth drivers, like online shopping, are still in place. All retailers need to offer online shipping. As the worldwide economy continues to grow, it will do fine. Problem is it exploded during pandemic. Attractive valuation. Both competition and supply have picked up. He prefers TFII and CNR.

Down 70%. Profitable. 20x earnings. Way ahead of competition. With all the competition from Porsche and the like, may have lost the "cool" factor. If the strategy was to be a mass-market car, still lots of runway. Stock's caught his eye. He owns RACE instead.

Investor Day didn't deliver. Higher costs. Dividend growth going to be less robust, but not at risk. Rising interest rates have hurt bond-proxy stocks. Don't want to be in this if you expect markets to improve. Good for dividend seekers, but not at the top of his list for a 2023 recovery. Yield is 6.8%, attractive.

(A Top Pick Jan 04/22, Up 1%) Great counter-cyclical business with the economy slowing. Apartment vacancies and distressed commercial listings start to go up. Capital light. Record results in 2022, he expects the same for 2023.

(A Top Pick Jan 04/22, Down 14%) Fabulous fundamental 2022, and he expects record results again in 2023. 48-year track record of raising dividend, raised by 11% in 2022. Yield is 4%.

(A Top Pick Jan 04/22, Down 15%) Takes a fee every time a car is totalled and sold on its site. Capital light, global. Used car prices are now coming down. Insurance companies are going to start increasing volume through its junkyards. He expects a record 2023. One of the best performers, should continue.

EV future in North America. In NA, the EV infrastructure is not ready for prime time. We're decades and decades behind. US and Canada are such huge countries with so many rural areas, it won't happen for a long time.

Canadian banks. Mixed bag on results. TD fabulous. RY pretty good, and then it surprised the market with the HSBC acquisition. CM and BNS horrible. NA so-so, but affected by a 1-time issue. Stick with the ones that continue to knock it out of the park -- TD, RY, and NA. He owns these 3, and is happy to continue buying. He doesn't foresee a really bad recession in Canada in 2023. Immigration will offset a lot of the housing issues, interest rates will start to come down later this year. Ontario is still a wealthy economy. Banks can offset a lot of their mortgages. They do have exposure, but it's not as huge as you think. Live and die with wealth management and investment banking operations, so they need the economy to improve.