Are we headed for an inevitable recession? Some experts say yes, some say no.
“I think a recession is both likely globally and most probable in Canada,” former Bank of Canada and Bank of England governor Mark Carney said recently.
“I would put it this way,” he added. “I’m afraid it’s a bit like air travel these days. We know where we’re headed, we just don’t know when we are going to get there, so there’s some uncertainty about the exact time.”
So what’s an investor to do? Well, for one thing, the looming bad news has some valuations down to attractive levels and some fund managers are jumping in to them. Recession proof stocks? Let’s call them “recession resistant.
Take Disney (Walt Disney Stock Quote, Charts, News, Analysts, Financials NYSE:DIS), for example. Portfolio manager Paul Harris says the stock is more than attractive right now.
“It’s trading at 21x earnings, and from my perspective you’re getting a great franchise and a great brand. I think I would look to buy it here,” he said recently.
Harris said Disney has done very well with streaming, where Disney+ has outperformed expectations and the company has been astute in adding content and franchising its money-makers. Disney reported a nice bump in subscribers to its streaming platform in its latest quarter, adding 12.1 million subscriptions to hit 164.2 million, ahead of analysts’ expectations at 160.45 million.
It’s still a waiting game on parks, Harris said, but the fundamentals look good enough for investors to consider owning Disney here.
“I do think Disney needs the parks business to be in good shape,” he said. “But from a balance sheet perspective, because they cut their dividend when [the pandemic] happened their balance sheet actually looks pretty good and I think it can actually get better if they make some of these sales.”
Speaking of streaming, another fund manager, Kim Bolton of Black Swan Dexteritas just named Netflix (Netflix Stock Quote, Charts, News, Analysts, Financials NASDAQ:NFLX) one of his top picks for the year ahead.
Bolton said the market is going to keep liking Netflix for its new ad-infused strategy.
“[Their] subscribers were coming down, but they still have 225 million subscribers around the world, which is phenomenal, in 190 countries,” said Bolton, speaking on BNN Bloomberg this past Wednesday.
“But then they got on the bandwagon which really gave them a pop, especially with the analysts and investors, where they came up with their company’s ad plan,” he said. “That’s really given [the stock] a boost.”
Bolton said that getting NFLX down at around $295 or $280 per share would make for a great buy.
“We just picked this up. And you know what? It’s down a little bit today down, [but] the average analyst actually has a 12-month price target on Netflix of $375. You can see it on the charts where it’s just fell off a cliff back there in May because their subscriber numbers had come down,” Bolton said.
And in Canada, National Bank Financial analyst Richard Tse likes the latest quarterly results from Canadian IT consulting giant CGI Inc (CGI Inc Stock Quote, Charts, News, Analysts, Financials TSX:GIB.A), recently Tse reiterating an “Outperform” rating on the stock. Tse said CGI’s business should prove resilient during the currently tough macroeconomic environment.
In a report issued this week, Tse noted that CGI was able to preserve margins in its recent fourth quarter results, while on M&A he praised the company’s record of driving value from its acquisitions, with a return on invested capital of 15.7 per cent in fiscal 2022 compared to 14.9 per cent in fiscal 2021.
“Investors following our research will recall GIB.A / GIB has been our top (short-term) idea since the beginning of the year given its combination of growth and defensive attributes. Year to date, GIB.A is down -2.0 per cent versus NASDAQ: -32.7 per cent and S&P Info Tech: -29.0 per cent; while not a positive return, it continues to outperform meaningfully – despite that, it remains a favourite in a volatile backdrop,” Tse wrote.
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