2024 Top Pick This past year brought welcome relief to money managers who had endured a distinctly awful 2022, when nearly every investment under the sun got burned.
While 2023 was choppy overall, stocks and bonds have mounted a powerful year-end rally. Victory signs are emerging in the fight against inflation, even as major developed economies avoid descending into a deep downturn.
This was not what many had envisioned for 2023. A recession had seemed almost inescapable owing to one of the fastest central bank tightening cycles in history, with the inverted yield curve – when short-term bonds offer bigger yields than longer-term ones – sending a clear and ominous warning. With this as the backdrop heading into the year, many money managers were advocating for defensive positioning in things like sturdy dividend stocks and recession-resistant consumer staples.
Yet, what transpired was a year of magnificent returns from the high-growth and pricey U.S. tech giants, and by year-end, even riskier small-caps were shining. Bonds gyrated through the year, but were in a clear upswing by the end, bolstered by their capital gains potential as central bankers provided strong hints interest rate cuts were nearing. Balanced portfolios that consist of both equities and fixed income, much maligned just 12 months ago after a year in which nothing worked, are finding admirers again.
The S&P 500, including dividends, has returned nearly 25 per cent this year. That’s more than double the 11-per-cent total returns from the S&P/TSX Composite Index, which is tech-light but full of defensive dividend payers.
A year ago, nine Canadian fund managers bravely broke out their 2023 crystal balls for us. We thought we’d check back in to see how their recommendations fared – and what their best advice and top picks are for the year ahead.
Craig Jerusalim, senior portfolio manager, CIBC Asset Management
Last year’s pick: Brookfield Corp.
YTD return: up 24.1 per cent
If the past year has taught us anything, it’s that making macro calls based on sentiment and backwards-looking indicators is a losing prospect. While we have our views on interest rates, inflation and the economy, our best advice for 2024 is to avoid the temptation for market timing. The market will always gyrate up and down, but the bias is unquestionably higher. Pessimists sound really intelligent and prudent, but optimists make money. The best way to add value is to stay fully invested in a well-diversified, balanced portfolio of high-quality, growing companies. Selecting the most resilient and highest-quality companies positions you to survive virtually any economic downturn, but also positions you to thrive once markets inevitably improve.
Top pick for 2024: Last year we selected Brookfield Corporation as our top pick for 2023 because of the significant discount the asset manager was trading at relative to its sum of parts. While we were tempted to stick with Brookfield as our choice for 2024, as the company has only partially closed its discount to net asset value, we see even more upside potential in Trisura Group Ltd. . Trisura is a North American specialty property and casualty insurer with a track record of profitable growth and consistent underwriting profit margins. Despite the company continuing to grow more than 20 per cent per year, while earning a return on equity of 20 per cent, it is still trading at a meagre 12.5x forward earnings. We expect its consistent execution on growth eventually to be recognized by the market with commensurate multiple expansion.