PI Financial’s Guy Lapierre names financial stock Visa Inc. and technology stock Apple Inc. as his current ‘best buy’ choices.
Vancouver-area portfolio manager Guy Lapierre says that since late September he has found reasons to look up and returned to an offensive investing tack after months on the defensive, despite lingering uncertainty.
“We are very optimistic about the next three to five years,” says Mr. Lapierre in an interview with Investor’s Digest.
Mr. Lapierre serves as a PI Financial vice-president and branch manager as well as a portfolio manager.
Rosy outlook, but trailing stops in place
Promising factors contributing to his rosy outlook include continuing rock-bottom interest rates, stimulus to come from south of the border and elsewhere, pent-up consumer demand and, of course, a COVID-19 vaccine that will soon begin distribution in Canada.
Nevertheless, he adds that trailing stops on his clients’ investments will remain the order of the day given the many unknowns related to widespread vaccine distribution and the prospect of ominous headlines to come. “Every position I bought in September has a trailing stop on it.”
The portfolio manager says: “We are favouring sector leaders with an eye to who’s going to survive the unknowns associated with COVID. We have been much more active lately (trading stocks and taking profits off the table before buying more on dips) than in the last six years.” His current model assumes that the pandemic will not be fully resolved until after next summer.
Recalling the fall, Mr. Lapierre notes that even before Americans voted, “we were neutral on the outcome of the election in the US”.
US stimulus package will drive stocks up
He says his team tried to avoid personal and political bias as much as possible in modelling either a Biden presidency or a Trump presidency, predicting that a post-election stimulus package of US$2 trillion to US$4 trillion would “inevitably lead to higher stock prices”.
“It was really not a question of whether the markets would go up but what sectors would lift it,” the portfolio manager remarks.
While he says that the immediate post-COVID recovery in the summer surprised him, gains in that period were dominated by a small handful of stocks and not supported by signs of longer-term economic growth in the absence of a vaccine.
The market pullback in September led to clearer investment decisions. “Most recently, we’ve started to look at the consumer stocks with reference to the 60 per cent of the economy that we believe is intact,” says Mr. Lapierre.
He asserts that demand for goods and services from industries outside of travel, leisure and entertainment has remained largely intact, and is even helped along by the inability to spend on the latter.
Tech stock Apple still favoured
Accordingly, the portfolio manager names financial stock Visa Inc. (NYSE—V) and technology stock Apple Inc. (NASDAQ—AAPL) as his “best buy” choices.
A previous favourite of Mr. Lapierre, following Apple’s four-to-one split at the end of August, he started to buy it again. Still, he cautions that he is opting for a “slice of Apple” these days.
“It’s an easy recommendation but the change of stance is the more active trading,” he says, explaining that based on its earnings alone, Apple’s share upside could be 20 per cent or more.
Analysts predict the company will do better in the Christmas quarter this year than last year, which was already remarkably good. (The consensus earnings forecast for the last quarter of 2020 is US$1.38 per share, compared to US$1.26 a share at 2019’s end.)
Mr. Lapierre suggests that families at the middle income level and higher will be especially drawn to updated and new iPad, Macintosh laptop and iPhone models (capable of 5G for early adopters and otherwise) since they have a surplus of funds they could not spend in the summer.
Fin-tech stock Visa supports on-line retail
Meanwhile, the portfolio manager’s support for Visa rests on the company’s business of supporting Internet retail and providing fin-tech infrastructure.
“Online payment systems generally rely on Visa for a backbone so in the gold rush for fin-tech, buying Visa you are in effect buying shovels rather than the gold miners,” he says.
Even if there are fewer vendors able to operate at present, consumers are spending a similar amount of money, just on different things, the portfolio manager argues. Further priming Visa for success on the backs of online retailers is its lack of responsibility for collecting or absorbing bad debt if consumers fail to pay up. Instead, the bulk of its revenue comes from vendor-paid processing fees.
“They’re not concerned about which sector or who is transacting, but rather it’s the number of transactions that benefits them,” Mr. Lapierre emphasizes.
This is an edited version of an article that was originally published for subscribers in the December 18, 2020, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.
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