Stock Picks for August 2024
Hello! Today is August 9th 2024, and it’s time for some new stock picks!
As usual, I am going to review the performance of my picks from this time last year first, then I am going to give a market and economic conditions overview and proceed with my top stock picks for the next 12 months and beyond.
Performance Review
This time last year I picked National Grid, the stock was up 17% in USD including dividends; Fortis, up 12.8%, Ennis, up 11%, and MSAD Insurance, up 84.3%! These stocks averaged a total return of 31.3%, which compares with 19.9% for the performance of the MSCI World Equity Index, as represented by the URTH ETF.
Slowdown Ahead?
The economy in the last year or so has been surprisingly resilient despite the big rise in interest rates. Higher interest rates means lower demand for homes and cars as these things are usually financed. A large portion of households’ income goes towards housing and transportation so when the cost of these items goes up there is usually less money left over for discretionary spending and saving and investing. Consequently the economy and stock market tend to not do too well.
Well it turns out that government deficit spending more than compensated for the expected slowdown in consumer spending so it kept both the economy and the markets afloat.
Deficit spending is expected to continue into the last quarter of 2024 and into 2025 even if the Republicans get the White House in the next election in the US. With that in mind it’s unclear now as to what will dominate: natural market forces or government spending.
Making a top down call on which way the economy goes under such massive intervention from governments around the world and especially the US government is hard. Since it’s always a good idea to stick to a proven approach of picking good companies at good prices, I’ll be doing that again for my best stock picks:
Today’s Stock Picks
Vale SA
My first stock pick is Vale SA (NYSE:VALE). Vale is a large global miner and the world’s largest producer of iron ore and pellets. In recent years the company has sold noncore assets such as its fertilizer, coal, and steel operations to concentrate on iron ore, nickel, and copper. Earnings are dominated by the bulk materials division, primarily iron ore and iron ore pellets. The base metals division is much smaller, consisting of nickel mines and smelters along with copper mines producing copper in concentrate. Vale is in a secular growth space, producing the metals and minerals needed by the growing battery EV vehicle market. The stock pays an incredible 14.5% dividend! As investors we just need the stock price to not go down do do well. Even if the dividend is cut by 1/3rd, we’ll still do well.
BCE
My second pick is going to be Bell Canada, (TSX:BCE). BCE provides wireless, broadband, television, and landline phone services in Canada. It is one of the big three national wireless carriers, with over 10 million customers constituting about 30% of the market.The stock is priced reasonably well and has a dividend yield of 8.3%.
TC Energy Corp
My third stock pick is TC Energy Corp, (TSX:TRP). TC Energy operates natural gas, oil, and power generation assets in Canada and the United States. The firm operates more than 60,000 miles of oil and gas pipelines, more than 650 billion cubic feet of natural gas storage, and about 4,300 megawatts of electric power. This sort of company does well almost regardless of economic conditions so the key is to buy the stock when the price is good. I believe the price is reasonable and it has a dividend yield of 6.4%
All 3 stock picks have some similar characteristics: they are large cap stocks, they have strong balance sheets and good dividend yield. Historically, the stock market usually peaked around the time of the first interest rate cut by the US Fed. Then it takes about 12 months for the market to bottom. During this time it’s important to stick to quality large cap stocks. Towards the end of an easing cycle would be the time to move into small cap, lower quality and growth stocks as those will tend to move up the most in a recovery.
Give Us a Call
As always, if you have a question on these stocks or any other investments, please do not hesitate to give us a call. Thank you have a great day!
- Stock Picks for September 2024 - September 12, 2024
- Stock Picks for August 2024 - August 9, 2024
- Stock Picks for January 2024 - January 11, 2024
