CIBC CIBC money manager Craig Jerusalim reveals his Canadian stock picks to ride out inflation worries
Money manager Craig Jerusalim isn’t waiting to find out if the recent spike in inflation will prove to be temporary or lasting. What matters most, he says, is whether investors start to worry about a long stretch of higher prices.
The U.S. consumer price index jumped 5.4 per cent in July versus a year earlier, the Labour Department reported Wednesday, adding to recent big price gains in the United States and Canada. Still, a debate continues about whether inflation will moderate in the months ahead, or prove to be a longer-term problem.
“The psychology aspect of it is that, as inflation heats up, even if it is transitory, people might not believe it and it could spook markets from a valuation perspective,” says Mr. Jerusalim, a senior portfolio manager with CIBC Asset Management in Toronto, who focuses on Canadian equities.
That’s why he’s making some shifts in his portfolios away from high-growth stocks and toward those he believes will benefit from rising inflation, regardless of how long it lasts.
“I’m shying away from some of the expensive growth companies that have typically found their way into my growthier portfolios and overweighting the higher quality, more modest growth companies that are trading at more reasonable valuations,” he says.
Mr. Jerusalim manages about $5.5-billion in assets including three main funds; The Renaissance Canadian Dividend Fund, the CIBC Dividend Growth Fund and the Renaissance Canadian Growth Fund. The funds have each returned between 29 and 31 per cent, after fees, over the past year, as of July 31.
He believes stocks in general are a good way for investors to defend their portfolios against rising inflation. Here are some of his picks:
Brookfield Asset Management Inc. (BAM.A-T)
Brookfield’s diverse assets make it a good bet in a rising price environment as well as a market where investors are looking for alternative assets, Mr. Jerusalim says. Brookfield’s assets are benefiting from the low-interest-rate environment and improving economic growth coming out of the pandemic.
“That is about as perfect a backdrop for an asset manager that owns and operates real assets – everything from toll roads and bridges to rail networks and renewable sources of [power] generation around the globe – as well as private equity and real estate,” he says.
“As its subsidiaries grow, as its assets under management grow, the fees are all accrued by the parent, Brookfield Asset Management,” he adds.
As for risks, since Brookfield is well diversified globally, it’s susceptible to a slowdown in global GDP, especially if interest rates rise too quickly. However, he believes Brookfield can still outperform its peers in that type of scenario.