Hap Sneddon, president and chief portfolio manager, Castlemoore Inc.

FOCUS: technical analysis

Top Picks: Definity Financial, Berkshire Hathaway, Coca-Cola

MARKET OUTLOOK:

Handicapping the tariff bomb sent out to the world by the U.S. is tough. Net-net for Canada, it really only amounts to a five per cent surcharge – not bad. This is reflected, in part, in the surging loonie against the U.S. dollar. But if all the barriers to trade stay where they are the odds of a global recession will increase and drag Canada down eventually.

To me, the goal of the trade strife is to create freer trade not less or costlier trade. This situation is forcing governments to examine their own tariffs and see if they are comfortable bearing the new ones levied against them based on up to 50 per cent of what they are charging the U.S. (a deal for now). Except for food due to the immutable need for a country’s food security, nations may conclude that true free trade is the best course. The U.S. may also yet decide to soften its stance on a country-by-country basis if there is dialogue and plans.

In the meantime, the technical read is ultra-bearish. The current put/call stats are high, indexes are probing for support levels, currencies are volatile and fixed income only offering fake refuge.

When things speed up, we should slow down.

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TOP PICKS:

Definity Financial (DFY TSX)

Definity is a Canadian property and casualty insurer that provides auto, property, and liability coverage to individuals and businesses. The bottom-line story today is that the company’s return on equity has a bright future. Recent earnings saw top-line growth of over nine per cent and very strong expense management. Underwriting and investment income and gross premiums written (GPW) all too showed well, reflecting robust execution and control.

Berkshire Hathaway (BRK-B NYSE)

Thought there have increasingly been concerns about leadership legacy and its sheer size, the cultivation of its next leadership, patience in deploying what is not an almost $500 billion cash hoard and “sum-of-the-parts” make Berkshire’s future rather bright. There are many reasons why the company will continue to beat the S&P 500 on all time frames.

Coca-Cola (KO NYSE)

We all know Coke but here’s all its brands. In traditional pop or “soda”: Coca-Cola, Sprite and Fanta. In water, sports, coffee, and tea brands: Dasani, Smartwater, Vitaminwater, Topo Chico, BODYARMOR, Powerade, Costa, Georgia, Fuze Tea, Gold Peak and Ayataka. In juice and dairy: Minute Maid, Simply, Innocent, Del Valle, Fairlife and AdeS. It operates in two lines of business: concentrate operations and finished product operations. Due to its focus on a total beverage portfolio, including some new developments in the coffee category, its pricing power, geographical diversification, and close retailer relations – it really gets local culture and taste preference.

PAST PICKS: May 29, 2024

Schneider Electric SE (SBGSY OTC)

• Then: US$49.06
• Now: US$41.08
• Return: -16%
• Total Return: -16%

Costco (COST NASD)

• Then: US$806.52
• Now: US$953.71
• Return: 18%
• Total Return: 19%

Chemtrade Logistics (CHE.UN TSX)

• Then: $9.16
• Now: $9.33
• Return: 2%
• Total Return: 9%

Total Return Average: 4%