We asked four market pros: If you had $100,000 to invest for the next decade, what stock or ETF would you buy and hold?
David Rosenberg, chief economist and strategist for Gluskin Sheff + Associates Inc.
Christopher Katsarov/The Globe and Mail
My recommendation: the iShares MSCI Japan ETF (EWJ-NYSE). Japan has a transformational leader in Shinzo Abe, whose supply-side policies have precipitated a boost to the economy’s structural growth rate. The female participation rate is on the rise and importing foreign labour is no longer taboo. An equity culture is finally taking hold as well in a society that, in the past, kept their money under the mattress, and the stock market is among the most inexpensive in the industrialized world. Savings rates are very high, Japan commands a current account surplus and while the country’s debt is sky-high, it is all held internally. Fiscal stimulus is grabbing the baton from monetary policy and will provide a positive GDP thrust in the coming years. And as everyone focuses on U.S.-China trade, impeachment proceedings and Brexit, few seem to be aware that the 2020 Summer Olympics are in Tokyo and this, too, will trigger upward revisions to the economy and earnings in the months ahead.
Stephen Takacsy, president and CEO, and chief investment officer, Lester Asset Management
Christinne Muschi/The Globe and Mail
That’s a tough question at a time of such business disruption and what will likely be perpetual global trade wars. Ten years is an eternity for a tech stock, for example, given the rapid rate of technological change. We’re not necessarily thematic in our investment approach, other than avoiding a sector such as resources, but thinking long term, there are strong industry tailwinds when it comes to demographic trends and combating climate change. For these reasons, we own several great Canadian businesses that are benefiting from the aging population, such as Sienna Senior Living, Savaria, Centric Health, K-Bro Linen and Park Lawn. In a sense, we are vertically integrated from retirement residences to funeral services. We also own leaders in renewable energy, such as Algonquin Power and Utilities, Boralex, and Innergex. These companies continue to increase their dividends as their pipeline of green-power projects grows, and their valuations will rise from fund flows driven by ESG investing over the next decade. So to pick one, I would say Algonquin Power and Utilities Corp. (AQN-TSX), since it owns a diversified mix of regulated and unregulated utilities.
Tim McElvaine, founder of McElvaine Investment Management
Tibor Kolley/The Globe and Mail
My suggestion is Tourmaline Oil Corp. (TOU-TSX). I look for cheap, out-of-favour securities with good balance sheets where insiders have skin in the game. Tourmaline is one of Canada’s largest producers of natural gas in spite of its name. As an energy stock it is out of favour, as a gas stock it is more out of favour and, finally, it was removed from the MSCI Canada Index in November, so there was more selling. A triple crown of dislike!
What I look for are assets worth more than the stock price and a balance sheet which ensures survival. Tourmaline is a low-cost operator, has significant unbooked reserves, as well as optionality in its infrastructure assets (including its recent creation of Topaz). Finally, board members (primarily Mike Rose, its chairman and CEO) own collectively more than 19 million shares.
For a 10-year holder, from these prices, Tourmaline’s dividend, free cash flow generation, growing production profile, significant asset base, insider ownership and history of good capital allocation should lead to good returns.
Leanne Scott, vice-president and portfolio manager, Leith Wheeler Investment Counsel
BEN NELMS/The Globe and Mail
In regard to individual names, we have many that we’ve held in our Canadian equity fund for well over 10 years. One that stands out is Toromont Industries Ltd. (TIH-TSX), a stock we first bought close to 24 years ago. The company – which acts as the dealer of Caterpillar equipment from Manitoba to the Maritimes – has a very strong entrepreneurial team with a proven track record of delivering steady top- and bottom-line growth, a dedicated focus on safety, a strong balance sheet and an experienced board of directors.
Toromont’s diversified end market includes infrastructure, construction, mining, waste management and forestry. Through its 2017 acquisition of Hewitt Group, the company effectively doubled its size and gave them the opportunity to expand their rental business into Quebec – the benefits of which are just beginning to unfold. If you believe in Canada and the need to continue to improve our infrastructure, TIH is the way to go. The industry is consolidating and there is also a big upside to their parts and services business.
As long as the Toromont investment thesis remains intact, we are happy to hold it for the next 10-plus years.
Scott Barlow, market strategist with Globe Investor
The Globe and Mail
I choose the Vanguard FTSE Emerging Markets All Cap Index ETF (VEE-TSX), despite the high probability that an economic slowdown in China will make it look like a terrible pick for a significant period. The Chinese growth model is starting to drown in the debt-related excesses of its 30-year success and a reorientation of the economy would prove a hurdle to the ETF’s success in the 2020s. But emerging markets equities are coming off a decade of underperformance and a bounceback is likely. In addition, the demographics of the developing world outside of China are far more conducive to economic growth than in the G10.
Darcy Keith