Craig Basinger, chief market strategist at Toronto-based Purpose Investments Inc.The Globe and Mail
Money manager Craig Basinger has been investing more defensively in recent months, even before U.S. President Donald Trump launched a tariff war this week that sent markets into a downward spiral.
Mr. Basinger’s take is that inflation is back and tariffs – if they do come, after being delayed again until April 2 – will likely worsen it.
“Inflation is going to be more volatile,” says the chief market strategist at Toronto-based Purpose Investments Inc., who oversees about $2-billion of the firm’s more than $20-billion in assets.
If tariffs are ultimately slapped on Canada, Mr. Basinger isn’t convinced they’ll endure, especially if markets continue to react negatively. He calls it the “Trump Put,” given the broad belief that Mr. Trump measures his success on the performance of U.S. stock markets.
“If markets get bad enough, we could see a softening or reversal of policies markets dislike,” he says.
Mr. Basinger says tariffs could spur a recession in Canada that could dampen inflation, but a weaker loonie and any retaliatory tariffs would add to inflation.
“Dare we say stagflation?” he says.
While the tariff war plays out, Mr. Basinger’s firm will forge ahead with its active and “contrarian” dividend strategy that ranges from interest-rate sensitive companies – such as pipelines and utilities – to cyclical stocks in sectors such as energy, industrials and technology.
“We’re fairly price sensitive,” he says. “We don’t mind buying things out of favour and being patient.”
Mr. Basinger’s team has been moving into more defensive sectors, including health care, consumer staples, financials, utilities, telecommunications and materials such as gold.
“On the beaten down names/sectors, this is starting to create some buying opportunities,” he says.
The firm’s $238-million Purpose Core Equity Income Fund (RDE-NE) has returned 13.2 per cent over the past year. Its three-year annualized return is 7 per cent and its five-year annualized return is 11.5 per cent. The performance is based on total returns, net of fees, as of Feb. 28 (before the market sell-off this week).
The Globe and Mail spoke with Mr. Basinger about three stocks he likes and one whose holdings he recently reduced:
Name three stocks you own today and why.
Restaurant Brands International Inc. (QSR-T) – the company behind Tim Hortons, Burger King, Popeyes Louisiana Kitchen and Firehouse Subs – is a stock we bought on Feb. 11 for $95.35 a share. We may be a bit early on this one, but the stock was down a lot last year as the company struggled a bit on same-store sales. The valuation is what got us intrigued.
There has been an uptick in the quick-service space recently. QSR’s brands lagged with consumer value promotions, so we see a catch-up trade. The company also pays a good dividend yield of about 4 per cent. It was a bit out of favour when we bought it, which is something we look for.
Telus Corp. (T-T) is another stock we bought on Feb. 11 at $20.84 a share. Of the three major telcos in Canada, Telus is our favourite. It has a healthy dividend of about 7 per cent, decent free cash flow, and has largely finished its capex spending on building more fibre optic and 5G infrastructure.
The sentiment in the telco space is negative right now because of issues such as price competition, but that’s starting to normalize, which could be positive for this space. We also hold a bit of Rogers Communications Inc. (RCI-B-T) but we don’t hold BCE Inc. (BCE-T).
Toronto-Dominion Bank (TD-T) is a stock we bought on Nov. 26 for $78.50 a share. We bought it on the news of anti-money-laundering settlements in the U.S., how bad it’s going to be, and if it’s going to slow down the bank’s ability to grow in the U.S. I think the market overreacted. I don’t think investors look far enough into the future. In our view, it got overly punished.
It’s a bit of a contrarian move, but since we bought TD, it’s been the second-best performing bank in Canada – a hair behind our biggest bank position, Bank of Montreal (BMO-T), which we’ve been taking some profits on recently. We also hold Royal Bank of Canada (RY-T) and a bit of Bank of Nova Scotia (BNS-T).
Name a stock you sold (or trimmed) recently.
Cameco Corp. (CCO-T) is a stock we owned for about eight years – since the early days of Purpose Core Equity Income Fund – and trimmed considerably in November at $82.42 a share. Because we have an active strategy for more cyclical stocks such as Cameco, we tend to add or trim more often, ideally trimming on strength and adding on weakness. With the stock price now trading around $60, it’s starting to look more appealing.
This interview has been edited and condensed.