Like most money managers these days, Leanne Scott is preparing her clients for some near-term market volatility now that Donald Trump is the U.S. President.
To weather the storm some are forecasting, Ms. Scott, vice-president of private clients and foundations at Vancouver-based Leith Wheeler Investment Counsel Ltd., is focusing on less expensive companies and sectors that could see growth ahead. That includes banks, energy and infrastructure companies.
The Globe recently spoke with Ms. Scott about her investing strategy on behalf of her clients, which include private investors, charitable organizations, First Nations and pensions.
What are some of the top concerns you're hearing from investors today?
The No. 1 concern is the political situation south of the border. That is arguably going to be one of the main drivers of capital markets in Canada and likely globally for 2017 – the U.S. policy agenda.
I don't think anyone has a good handle yet on what that's going to be. So far, capital markets have given it the benefit of the doubt. [U.S. President Donald Trump] talks about easing regulations in sectors such as financial and pharmaceuticals and looking at boosting profits through tax reform. He has talked a lot about infrastructure spending as well. If these things go ahead, there is no doubt that Canada would benefit from a stronger U.S. economy. The flip side is, we don't know how protectionist they're going to be. The path ahead is definitely going to be rocky. There are both upside and downside risks.
The low-rate environment has also been challenging for clients for some time now. A lot of people are also talking about the market being expensive right now, and we would agree. That said, there are still great opportunities to be found. You just have to dig a little deeper.
What stocks have you been buying lately?
We like banks, both in Canada and south of the border, because they are well-priced and offer an attractive dividend yield. We currently find banks more attractive than utilities. We believe people have overpaid for safety and yield in the utilities sector. Banks south of the border will benefit if [President] Trump follows through on less regulation and higher short-term rates as the [U.S. Federal Reserve] continues to raise rates. There are some industrials, too, that we like that will benefit from the recent rebound in resource prices.
One example of a small-cap stock we like is Raging River Exploration, a junior oil and gas producer. One of the main reasons is its strong management team and board. The management team owns 13 per cent of the company. If management has skin in the game, that's a good sign.
A mid-cap name we like is [heavy-equipment dealer] Finning International Inc. We view Finning as a turnaround story. The company has done some major cost-cutting and now that those cuts are behind them their profit profile looks very good over the next two to three years. They have a lot of projects on the go.
A large-cap name we like is Bank of Nova Scotia. It's a quality company trading at a discount to its peers right now, the other five banks.
One of the reasons we like it, there has been a leadership change in the retail banking area and they're committed to focusing on growing this area … by broadening their exposure beyond mortgages. They're also doing well in their core international markets.
What stocks are you selling?
Nothing in particular that we are selling outright, right now. A lot of stocks had a great run and we are trimming … including some cyclical, resource and some financials.
Any stock you wish you bought?
Apple, 20 years ago.
This interview has been edited and condensed.