Despite its immense toll, the pandemic has yielded silver linings. In my bubble, the unexpected bonus has been the extra time to connect with my boys. Similarly, while we are disappointed to not be able to visit face-to-face at Odlum Brown’s 27th Annual Address, this year’s virtual event provides an opportunity to reach a broader audience and provide greater content.
At 3 PM on Wednesday, February 10, Odlum Brown’s President and Chief Executive Officer, Debra Hewson, will kick off our online presentation. She will share how Odlum Brown’s long history of taking care of our clients has been our differentiator through the challenges of the past year, and has led us to emerge well-positioned for the future. Then I will tell you why the probable surge in economic activity from a vaccine-driven uncorking of pent-up demand creates new risks and opportunities, and how we are positioning portfolios. Both Debra and I will answer a selection of questions previously submitted by our valued clients.
What’s most exciting about this year’s event is that video presentations from all of our highly regarded Equity Analysts will be served up à la carte after the main event. Previewed here, these presentations will be available on our website at odlumbrown.com following the Annual Address.
ESG Investing
Increasingly, investors are considering ESG – Environmental, Social and Governance – factors behind the companies in which they invest. In other words, are the companies they own good corporate citizens? While this approach is increasingly popular, evaluating a business’s behaviour has long been part of our investment process. Equity Analyst Stephen Boland highlights the risks inherent in investing alongside bad corporate citizens and the benefits of sticking with companies that consider their impact on all stakeholders.
Electric Vehicles 2.0
Over the last decade, we’ve seen a significant increase in the number of electric vehicles sold globally, from close to zero in 2010 to over two million last year. At less than 3%, electric vehicle sales still represent a relatively small percentage of total auto sales. However, this is expected to change as the key reasons against owning an electric vehicle – cost, range anxiety and limited choice – are starting to dissipate.
As a sequel to his 2018 Annual Address presentation, Equity Analyst Fai Lee examines General Motors and its new Ultium battery platform. Ultium is expected to make General Motors’ electric vehicles cost competitive with internal combustion engine vehicles. In addition, Ultium offers significant design flexibility and will reduce development times for new electric vehicle models. General Motors is well positioned to capitalize on the expected long-term growth in electric vehicle demand. The company’s attractive valuation and our optimistic outlook for its electric vehicle business make us very excited about General Motors’ stock.
Data Centres
Demand for online services has increased during the COVID-19 pandemic. Many have relied on ecommerce to buy goods and groceries from home. We’re connecting with family and friends with the click of a button, and we’re consuming more entertainment over virtual platforms. Ironically, all this online activity requires substantial physical infrastructure, such as powerful computers (called servers) and data centres in which to keep that equipment.
Equity Analyst Trevor Chang looks at Equinix, a global data centre real estate investment trust that leases warehouse space and manages systems for clients mainly in financial services, information technology and media. His presentation outlines what makes Equinix unique among its peers, the interconnections it provides tenants, the custom management services it offers and how the transition to faster 5G speeds could benefit the company going forward.
Our reliance on online services was growing long before the pandemic and will likely persist into the future. By investing in the infrastructure that supports those services, we can take advantage of the growth of this industry without having to guess which platform or provider will come out on top.
Semiconductors
Have you ever heard the saying, “Big doors swing on little hinges”? It’s often credited to W. Clement Stone, a 20th century American entrepreneur and philanthropist. Historical writings, however, suggest the proverb goes further back and references the massive cathedral doors seen all across Europe. The concept, though, is timeless, as it reminds us that sometimes it’s the smallest things that allow big things to happen. This is no truer than when thinking about semiconductors today – those tiny little chips that make our digital gadgets go.
Equity Analyst Steven Zicherman describes how semiconductor technology is growing in relevance. Over the past few years, this growth has been driven largely by increasing smartphone use and cloud computing. As we look forward, this growth should remain robust thanks to innovations in the automotive and industrial industries.
Large technology companies are evolving in ways that may be underappreciated. Apple and Google are implementing their own custom computer chips to differentiate their products and services. By using their own technology, these companies are realizing significant performance improvements. While the list of most valuable technology companies often changes over time, we are comforted that the big technology companies of today are leveraging semiconductor innovations to sustain and grow their moats.
Canadian Banks
During the Great Financial Crisis of 2008-2009, Canadian banks fared much better than their international peers, but they still struggled mightily. Investors were skeptical of the Canadian banks for many years thereafter, nervous about their ability to withstand poor economic environments.
Equity Analyst Benjamin Sinclair will explain how the pandemic has given the banks the opportunity to prove these skeptics wrong. Credit losses spiked, capital levels were put under pressure and the banks’ top lines faced headwinds. Yet almost a year later, the story has changed in the banks’ favour, with credit losses coming back down and capital levels rebounding.
The banks have certainly caught a few breaks, such as robust government stimulus measures and favourable equity markets, but they also deserve credit for their resiliency. Unlike during the Great Financial Crisis, the banks have been part of the solution rather than part of the problem. So as we look for solid companies to invest in for the long term, we have greater confidence in making the banks a part of that strategy.
Dividend-Paying Stocks
In the post-pandemic world, we believe boring will be rewarding. Equity Analyst Cory O’Krainetz discusses why the humdrum dividend-paying stocks like utilities and telecoms are particularly attractive in today’s market.
Bond yields are uncommonly low, even negative in some cases, and offer very little income for savers. Ultra-low interest rates have also helped inflate stock prices in many sectors, yet many of Canada’s most admired dividend-paying companies have been left behind. Instead, investors appear to be focused on more exciting industries, in search of faster growth and outsized returns. In our view, this distraction provides an attractive opportunity for dividend-seeking investors.
Utilities and telecoms may not be glamorous, but they play an important role in portfolios, providing a relatively stable source of income and growth.
Please visit our website later this month to view the full presentations. We look forward to sharing more with you then.
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