David Fingold, vice president and senior portfolio manager, Dynamic Funds

FOCUS: U.S. and global stocks  

MARKET OUTLOOK:

Given the recent volatility in equity and fixed-income markets, we recommend investors approach markets with a focus on quality companies. We define quality companies as those with superior balance sheets, above-average profitability and consistent profitability.

Recently, recession risk has risen. Central bankers intend to tighten financial conditions through interest rate increases as well as tapering and quantitative tightening. We expect that should lead to high-quality securities outperforming low-quality securities. Pent-up demand exists in some capital goods and certain financial institutions will benefit from higher interest rates.

While consumers may face headwinds, one would expect the leadership role in further economic expansion will be assumed by business investment as usually occurs when the economy passes through the mid-cycle. Defensive industries such as health care are attractive given long-term performance and defensiveness as volatility tends to rise from this point in the cycle.

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TOP PICKS:

Schlumberger (SLB NYSE)

Headquartered in Houston, Texas, Schlumberger N.V. also known as Schlumberger Limited is an oil services company. Through its subsidiaries, the company provides a wide range of services including technology, project management and information solutions to the international petroleum industry; as well as advanced acquisition and data processing surveys. After a lengthy down-cycle growth has resumed for the company.

Strauss Group (STRS TLV)

It is based in Petah Tikva, Israel and is a manufacturer of Middle Eastern salads and dips, coffee, water purification systems and sweets and salty snacks. Last year the company experienced recalls in two product categories. This year they have the benefit of comparing against depressed revenues and elevated expenses.

Northrop Grumman (NOC NYSE)

It is based in Falls Church, Virginia is a defence contractor focused on space, hypersonic and cyber technology. These are the areas expected to grow the fastest in expanding defence budgets in the west. The replacement cycle for decades-old ICBMs and long-range strategic bombers provides long-term visibility. 

PAST PICKS: March 14, 2022

Berkshire Hathaway (BRK.B NYSE)

• Then: $329.98
• Now: $313.87
• Return: -5%
• Total Return: -5%

Eli Lilly (LLY NYSE)

• Then: $269.00
• Now: $358.25
• Return: 33%
• Total Return: 34%

Chevron (CVX NYSE)

• Then: $166.74
• Now: $177.23
• Return: 6%
• Total Return: 9%

Total Return Average: 13%