David Driscoll's Top Picks: February 4, 2022

Top picks from David Driscoll, president and CEO, Liberty International Investment Management

MARKET OUTLOOK:

Recent quarterly results haven’t been as vibrant as many market analysts had expected or hoped for. That’s because higher inflation, supply chain interruptions and labour costs have hurt operating margins and reduced profit growth.

As a result, the stock market should be choppy through the year with multiple corrections depending on earnings, interest rates, COVID, economic re-openings, labour availability and geo-political risks. Tech stocks and small-caps, especially U.S. names, have been the weak sisters and the rotation to more value names with real revenues and profits have held up better.

I believe 2022 could be a year where investors really have to focus on risk management: Diversify across regions and industries, maintain equal weightings and enjoy rising dividends, using cash to buy more of what is owned if markets break down and go lower or if individual stocks suffer after a poor quarter.

Don’t feel like you have to do something for the sake of doing it. Share prices are irrelevant except the day you buy a stock and the day you sell it. Everything in between is irrelevant. Invest in businesses with the expectation of getting a piece of the profits each year in the form of a rising dividend. Remember, two-thirds of all performance comes from rising dividends and the re-investment of those dividends, not stock price movement.

Risk-adjusted returns are more important than nominal returns and short-term mentality should be replaced by a focus on long-term time and compounding.