Cardinal Update – May 2021
Steady as She Goes in Healthcare – Healthcare companies outperformed the broader index early on in the pandemic as there was a flight to safety. Since then, we have seen the technology sector and cyclical sectors such as financials and industrials significantly outperform, while healthcare has lagged. Healthcare is one of the few sectors not trading at an elevated valuation today, despite solid earnings growth and strong upcoming catalysts. The pandemic has caused the deferral of physician visits which in turn has led to fewer procedures and reduced screening for diseases. As we return to a more normal state, revenue and earnings growth should accelerate and companies such as Merck, Gilead Sciences, and Becton Dickinson will all be better off. Still, all of these names trade at attractive valuations relative to their historical ranges, peers, and the overall market.
COMPANY FOCUS: ENEL SPA – Enel Spa (Enel) is the largest European utility with a market capitalization of 83B
EUR and pays a dividend yielding 4.4%.
Click here to read more: Cardinal Update – May 2021
DM Monthly Report – April 2021
A DECADE OF SMALL CAP INVESTING AT DIXON MITCHELL – Ten years ago, we launched a new equity mandate which might have seemed like a departure for a firm that had built an investment reputation grounded on risk management. Though “small cap” is sometimes taken to mean ’speculation’ or ’venture’, there are also many businesses in the space that generate earnings and cash flow and which can be assessed on a fundamental basis. Importantly, we saw this segment of the market as an area where analyst coverage was limited and stocks were often misunderstood or disregarded, attributes which spelled opportunity for our hands-on analytical approach.
Click here to read more: DM Monthly Report – April 2021
Cardinal Quarterly – April 2021
MARKET OUTLOOK – Markets are off to a good start in 2021. Although most developed market indices have already achieved high single-digit returns in the first quarter, we believe there is still room to run higher in 2021. In fact, we cannot recall a year when so many factors were aligned for explosive GDP growth. Stimulus spending has remained at record highs, interest rates are near record lows, and consumers sitting on record savings are full of pent-up demand.
Click here to read more: Cardinal Quarterly – April 2021
DM Monthly Report – Mar 2021
PRUDENTIAL PAYBACK – Like just about everyone else at this time last year, Canada’s banks were justifiably concerned about what the unfolding pandemic would mean for their economic futures. How would mortgage books be impacted by surging unemployment and a potential chill across the real estate market? Where would the explosion of the government’s balance sheet send interest rates? Would ordinarily reliable wealth management and brokerage revenues plunge if investors became locked in a state of inactivity? Against this uncertain backdrop, the management teams of the big 5 banks sharply increased provisions for credit losses, while the Office of the Superintendent of Financial Institutions put a freeze on share buybacks and dividend increases.
As it turned out, the scale and swiftness of government programs, such as CERB, filled the economic chasm created by the lockdown and the principal worries hanging over the banks never came to pass.
Click here to read more: DM Monthly Report – March 2021
