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Many Canadian investors should diversify their portfolios geographically. Indeed, the country of origin bias can work against you, especially if you are overexposed to the TSX index, which is not very diversified to begin with. With so much exposure to energy, financials and materials on the TSX, it’s hard to find the other sectors to bring your portfolio diversification where it needs to be. Technology and consumer staples are rare on the TSX index. And while there are some really good ones on this side of the border, I think it makes sense to get some exposure to the United States, given the many options that Canadian investors can consider.
With the loonie rising to just under US$0.78 on Monday, I think investors may want to take advantage of the relative strength ahead. The US dollar has been incredibly strong in recent months. But that could change quickly, especially if the Bank of Canada (BoC) gets another upside shock in the next rate hike. Personally, I think the US dollar may be on the verge of weakening so that the Canadian dollar could once again hit the US$0.80-0.82 mark. If so, investors may wish to make the swap and take advantage of opportunities in the S&P 500.
Bet on asset managers
Currently, I’m a big fan of alternative asset managers. black stone (NYSE:BX) is an intriguing option after its 37% drop from peak to trough. Undoubtedly, Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) is a Canadian alternative asset manager that is also a great choice. That said, it’s important to know the differences between the two companies before backing up the truck to either one.
While I’m not against owning only BAM stocks, I do think there are benefits to owning both, as the appetite for alternative assets seems to continue to increase over time.
Blackstone is not just an American version of Brookfield. It’s a fairly lean and incredibly diversified asset manager. With over $680 billion in assets under management (AUM) and an intriguing credit and insurance business, Blackstone is a rare find with the ability to dodge and ride through storm clouds. future economy.
Recently, investors have been concerned about management’s warning that sales will plummet as a potential recession approaches. I think the post-news reaction (6% decline) has been overdone and I think management is cautious to err on the side of caution when it comes to the near future.
As valuations continue to fall, I would look to Blackstone to continue to pursue mergers and acquisitions. The company paid around US$48 billion for deals, with various takeovers of REITs (real estate investment trusts), including companies like Preferred Apartment Communities.
With a trusted name in the industry and an enviable real estate division, Blackstone is a wide moat solution considered a go-to by many affluent clienteles. At the time of writing, Blackstone shares are trading at 18.7 times price-to-earnings (P/E) and 6.9 times sales (P/S), both of which are well below market averages. investment services industry.
Brookfield is another flavor of asset manager. The Canadian darling is well-diversified, but management has expressed interest in splitting off its asset management division in the past. Undoubtedly, Brookfield is more asset-heavy than Blackstone.
A spin-off to become more asset-light could pave the way for multiple expansion. Either way, investors shouldn’t expect Brookfield to make any major changes anytime soon. Like Blackstone, Brookfield has the balance sheet to strike deals amid the broader market contraction.
At the time of writing, Brookfield shares are trading at 1.8 times book price (P/B), which is well below the industry average P/B of 3.5. With a growing dividend yield of 1.1%, Brookfield is a great choice as stocks attempt a comeback.