Buying Telus, selling Nvidia: How this portfolio manager is preparing for what comes next in the economy

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Money manager Brianne Gardner is investing a bit more defensively right now, given the market run-up so far this year and threats of a recession on the horizon.

“Caution is warranted based on how things have gone,” says Ms. Gardner, financial advisor and co-founder of Velocity Investment Partners at Raymond James Ltd. in Vancouver, who oversees about $160-million in assets.

She believes a mild recession is coming later this year or early in 2024 and, as a result, is investing in more defensive sectors such as consumer staples, health care, big pharma and, more recently, gold.

She’s also holding more cash than usual, specifically in high-interest savings accounts generating returns of around 5 per cent. The higher cash component – currently at about 7 per cent versus an average of about 2 per cent – also leaves her room to buy stocks that have fallen amid the market uncertainty.

“We’re being more tactical with our cash, taking profits and then using that capital to pick up some stocks that maybe have sold off or that we see better valuations,” she says.

The agile approach has helped generate positive returns in recent months. Ms. Gardner says her average client portfolio – which is roughly a mix of 65 per cent equities and 35 per cent fixed income – saw a total return of 8 to 10 per cent this year as of July 31. The total return over the past 12 months is about 6.5 to 8.5 per cent. The performance is net of fees.

The Globe and Mail recently spoke with Ms. Gardner about her investing style and what she’s been buying and selling.

Describe your investing style.

We are value-based active managers. We’ll hold positions longer term if they’re still performing well, but we’re also comfortable taking profits or cutting our losses if we feel there are better opportunities. Our goal is to capture upside potential while also limiting downside risk. For instance, if the market is down, we aim to be down by half as much to better protect our client’s wealth.

We believe that 80 per cent of returns come from being in the right sector, so we’ll shift our exposure depending on where we are in the business cycle. For instance, we were underweight fixed income heading into 2022, knowing that interest rates were heading higher. We also reduced our exposure to big tech around the same time. Both turned out to be good moves.

We got back into tech at the end of last year and early this year but have been taking profits again recently after valuations ran up. We’ve also been adding more fixed income based on the belief that the U.S. Federal Reserve and Bank of Canada could start cutting interest rates next year.

What have you been buying or adding?

One stock we’ve been adding back is Telus Corp. T-T. It has a stable business model and a great dividend that yields more than 6 per cent. The telecom sector has been beaten up a bit lately, but we see good value there today. There have been some concerns over the company’s operating gross margins, but we expect its revenue to grow 11 per cent this year and 5 per cent next year, so there’s upside potential. We think now is a good entry point.

We’ve also added gold exchange-traded funds, such as SPDR Gold Shares GLD-A, to our portfolios. The sector has seen a bit of a pullback lately, which we believe is a good buying opportunity. Gold is considered a haven for investors, and if a recession hits, it will be a good asset class to own.

What have you been selling?

We recently sold some technology stocks, specifically Amazon.com Inc. AMZN-Q and Nvidia Corp. NVDA-Q. We still like both companies, but they have seen a huge run-up this year – Nvidia is up more than 200 per cent – and we felt it was a good time to take profits.

We also recently sold Nutrien Ltd. NTR-T, the world’s largest fertilizer producer. Fundamentally, it’s still a good stock, but it has been on a downward trend over the past year, so we decided to get out and invest more into a different type of materials sector stock, specifically industrial gas.

What advice do you have for new investors?

Start saving and investing as early as possible. The sooner you start, the easier it is to accumulate wealth, thanks to the power of compound growth. Also, create a goals-based investment plan. List out what you want to achieve with your money and develop a plan to get there. Then, stick to that plan through good times and bad. Also, make sure your investment portfolio is well-diversified and tax-efficient. And rely on wealth and tax professionals to help you.

This interview has been edited and condensed.

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