Barry Schwartz, chief investment officer and portfolio manager, Baskin Wealth Management

MARKET OUTLOOK:

Synchronized global rate cuts have begun with Canada and the European Central Bank (ECB) reducing rates this week. We expect the U.S. to follow suit by September. Interest rates are way too restrictive in G7 countries given slowing economic growth and inflation. The markets have already, for the most part, figured this out given double-digit returns year-to-date for U.S. indices. Although valuations overall have risen, we are still finding lots of quality companies trading at very reasonable levels.

The S&P 500 Index is trading around 21 times this year’s expected earnings. That seems pricey, however, if you see decent organic revenue growth above inflation, rising profit margins, and double-digit earnings per share growth, you can't be faulted for being excited about the future.

Lower rates are good news for Canadian investors as well. Many Canadian dividend payers have been hurt for the past few years, but it is reasonable to expect that as rates fall, those invested in money markets and GICs will look to high dividend payers as better options for their portfolios.

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TOP PICKS:

MSCI (MSCI NYSE)

MSCI is a provider of indexes and data for asset managers and is a very high-quality business that we have followed for a long time. Given the recent sell-off in shares, we think shares are attractively valued given the quality of the business model.  MSCI has many elements of a great business: Asset-light, recurring revenue business model leading to very high margins and a strong brand with hard-to-replace products leading to strong pricing power

CoStar Group (CSGP NASD)

CoStar provides proprietary data on real estate transactions globally as well as owning several platform properties including Apartments.Com and Homes.Com. The company has a perfect balance sheet and has grown its revenues at double-digit rates for years. We believe the recent pullback in the shares provides investors with an excellent entry point.

Visa (V NYSE)

Visa has compounded its shareholder capital at an amazing clip since its IPO in 2008. The last five years, the stock has been mostly rangebound and that is perplexing to us given that the fundamentals have been very strong. Visa also trades at a discount to its competitor, Mastercard. We think Visa is one of the best businesses in the world.