theglobeandmail.com
U.S. Stock Focus Drives Double-Digit Returns for Baskin Wealth Management
Barry Schwartz, CIO of Baskin Wealth Management, overseeing $2.7 billion, shifted his portfolio to favor U.S. stocks due to a lack of reasonably valued Canadian options; this strategy yielded double-digit returns, including 29.4% in the past year.
- What factors drove Barry Schwartz's shift towards a predominantly U.S.-focused equity portfolio, and what are the immediate consequences of this strategy?
- Barry Schwartz, CIO of Baskin Wealth Management, favors U.S. stocks due to their high-quality business models and double-digit growth potential. His firm's portfolio is two-thirds U.S. stocks and one-third Canadian stocks, a shift from pre-2008. Baskin Wealth Management achieved double-digit returns recently, with a 29.4% return in the past year.
- How does Schwartz's investment philosophy, emphasizing quality over price, affect his stock selection process, and what are the underlying risks associated with this approach?
- Schwartz's preference for U.S. companies stems from a lack of reasonably valued Canadian stocks meeting his criteria (capital-light, recurring revenue, high ROI, strong management). He believes that despite high valuations (around 30 times earnings), the projected growth of the S&P 500 justifies this strategy, prioritizing quality over price. This approach contributed to the firm's strong performance, including a three-year annualized return of 14.2% and a five-year annualized return of 13.7%.
- Considering the current market conditions and Schwartz's experience with Canadian National Railway, what long-term implications might his investment approach have for portfolio diversification and risk management?
- Schwartz's investment strategy highlights a shift towards prioritizing business quality over valuation in the current market. His emphasis on recurring revenue and strong management teams reflects a focus on resilience and long-term growth potential, even at a premium price. Future success depends on the accuracy of growth projections for the U.S. market and the ability of chosen companies to maintain their competitive edge.
Cognitive Concepts
Framing Bias
The article is framed positively towards Barry Schwartz's investment strategy, highlighting the high returns achieved in recent years. The impressive performance figures (29.4% one-year return, 14.2% three-year annualized return, and 13.7% five-year annualized return) are prominently featured, potentially influencing readers to perceive his strategy as exceptionally successful without sufficient critical analysis. The reasons for selling Canadian National Railway are presented as simply a mistake in choosing between two rail companies, omitting potentially more complex factors contributing to the decision. The headline, if there was one, likely would focus on the success of his investment strategy rather than potential drawbacks.
Language Bias
The language used is generally neutral, but some phrases could be considered subtly loaded. For instance, describing the US companies as "Magnificent Seven" conveys a positive and almost admiring tone. The description of selling Canadian National Railway as "buying the wrong railroad" presents it as a simple mistake rather than a result of complex market forces. Alternatives could be more neutral terms or explanations such as referring to the companies using their respective ticker symbols and explaining the reasons for the sale in more detail.
Bias by Omission
The article focuses heavily on Barry Schwartz's investment strategy and choices, providing details on his portfolio's composition and performance. However, it omits discussion of potential risks associated with his strategy, such as over-reliance on specific sectors or vulnerability to market downturns. The article also lacks broader context on the Canadian stock market and its performance compared to the US market, which might provide additional insights into the reasons for his preference for US stocks. It also doesn't include analysis of whether his portfolio is suitable for other investors, or if the portfolio performance is replicable or an exception.
False Dichotomy
The article presents a false dichotomy by framing the investment choice as solely between Canadian and US stocks. The global market offers diverse options beyond these two countries, a limitation not acknowledged in the narrative. Further, the article presents "quality over price" as the overriding investment strategy, which simplifies the complex decision-making process involved in investing.
Sustainable Development Goals
The article focuses on the investment strategies of a wealth management firm achieving double-digit returns, indicating positive economic growth and potentially contributing to decent work through job creation and market expansion within the financial sector. The firm's success is tied to investments in successful companies, which reflects positive economic activity and growth. The discussion of stocks like MSCI, TransDigm, and Meta highlights growth in various sectors, impacting employment and economic activity.