Bio: Murray Leith (BComm, CFA), has over 20 years of experience as an Investment Analyst. He is a Vice President and Director of the Firm, as well as a member of Odlum Brown's Executive and Management Committees. He joined Odlum Brown in June 1994 and has managed the Odlum Brown Research Department since that time.
Mr. Leith formulates the Firm's economic outlook and equity investment strategy, in addition to covering individual companies, primarily in the Financial Services sector. Moreover, Mr. Leith and his team of Analysts established the Odlum Brown Model Portfolio over 14 years ago. This all-equity portfolio showcases how we believe individual investment recommendations should be used within the context of a client portfolio. The Model also provides a basis with which to measure the quality of our advice and the effectiveness of our disciplined investment strategy. Since inception, the Model's returns have outperformed the benchmark S&P/TSX Total Return Index by a considerable margin.
Q: Mr. Leith, in the face of the recent volatility in the stock market, a number of commentators are citing the over-valued nature of the markets based on the economic realities – what would be you’re view of the market right now?
A: It's the market of stocks that matters and not the stock market. From a bottom up fundamental perspective there are a lot of attractively priced stocks.
Q: What is your near and long term outlook for the Canadian Dollar with respect to its fundamental value and its impact on the Canadian economy?
A: The "fundamental" value of the dollar is purchasing power parity, which is around 85 cents. The dollar can stay out of over or undervalued for extended periods of time. Conditions are ripe for our dollar to remain overvalued. The long term implications are negative for the Canadian economy. Recently, the Canadian economy is doing poorly, in large part due to the exchange rate.
Q: With the US GDP data coming in better than expected last week and today’s ISM Index rising more than expected in addition to positive construction spending and pending home sales data, what is your read on the US economy going forward and its place in the global economic landscape?
A: I believe the US and global economy is in the very early stages of recovery. The US recovery will like surprise on the upside over the next few quarters, as there is a ton of stimulus in the system.
Q: Given that cyclical stocks have outperformed defensives in this rally since March 2009, can you please highlight one sector among Canadian stocks (e.g. can be financials, energy stocks, technology, resources etc.) that you believe to be overbought and due for a correction and one sector that you believe to be oversold and due for a bounce and why?
A: The resource stocks were over bought and are therefore experiencing a correction. The Utility stocks have been neglected and are due for a bounce.
Q: Lastly, can you please highlight 1 stock/theme that you think offers the best value moving forward and your reasons for liking it?
A: The best value is in large US stocks, particularly in the Consumer Staples and Health Care sectors. JNJ, KO and WMT are a few examples. A decade ago Canadians fell over themselves getting money out of the country. The results were horrible. Today, they do the opposite and will likely be disappointed again. The lesson from history is to swim against the consensus, because conventional wisdom is often wrong.
Thank You Mr. Leith!
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