Laura Lau, chief investment officer at Brompton Funds in Toronto.Illustration by Joel Kimmel
Money manager Laura Lau believes that falling interest rates and a slowing economy make it a good time for investors to get more defensive.
“We’re starting to see cracks in the economy,” says Ms. Lau, chief investment officer at Brompton Funds in Toronto, who oversees about $3-billion in assets across several funds in sectors such as financials, health care and technology, as well as a global dividend fund.
While Ms. Lau expects a “soft landing” and not a severe recession, she’s looking for companies that can withstand whatever volatility may be ahead. One particular fund she highlights is Brompton Sustainable Real Assets Dividend ETF BREA-T, a more defensive investment in light of the current market environment.
Its top five holdings as of Aug. 30 were Targa Resources Corp. TRGP-N at 4.7 per cent, Prysmian SpA PRYMF at 4.6 per cent, Hitachi Ltd. HTHIF at 4.2 per cent, Constellation Energy Corp. CEG-Q at 4.1 per cent and Nextera Energy Inc. NEE-S-N at 3.9 per cent.
The $20-million fund has returned 19.9 per cent so far this year and 25.7 per cent over the past 12 months. Its three-year annualized return is 8.7 per cent and its return since inception in April, 2020 is 11.7 per cent. The performance is based on total returns, net of fees, as of Aug. 30.
The Globe and Mail spoke with Ms. Lau recently about what she’s been buying and selling:
Name three stocks you’ve been buying and continue to own.
Welltower Inc. WELL-N is a real estate investment trust that invests in health care infrastructure. It has more than 2,000 properties across the U.S., Canada and the U.K. We bought this one in February at US$92.35.
We like that it has been growing faster than its competitors in two ways: higher occupancy post-COVID, and it has made acquisitions. It has a decent yield of 2.2 per cent. So, that’s nice, visible growth. A risk with this stock is if there’s another pandemic, people could start pulling out of nursing homes again. Another risk is if the company can’t close on some of its acquisitions.
Another stock we’ve been buying is Southern Co. SO-N, one of the largest utility companies in the U.S. We bought in December, 2022 at US$68.30 and added more at the end of August.
The company provides electric transmission and natural gas distribution across the southern U.S. It also just brought on a nuclear power plant, the first in a very long time in the U.S. Its data centre division has grown 17 per cent over the past year and it has a strong development pipeline to continue to grow it. It has a strong balance sheet with a 3-per-cent dividend yield. The risks are that the data centres might not ramp up as quickly as expected, but technology companies often like to move quickly.
Another stock we bought not long ago is Prysmian SpA PRYMF, an Italy-based electrical cable company. We started buying it in December, 2023 at €36.87 ($55.51).
It’s a multinational company that specializes in producing electrical cable for use in the energy and telecom sectors. It has plants worldwide in North America, Europe, Latin America, the Middle East and Asia. Its specialty is undersea cables for offshore wind turbines, in which it has a dominant market share. We like the growth potential for renewables as the world decarbonizes and electrifies. We also see growth in offshore wind. It may be slower than previous projections, but the growth remains.
Name a stock you recently sold.
Vinci SA VCISF is a France-based engineering and construction company we recently sold. The company got a lot of the work to help build the Paris Olympic venues, but that ended just before the games started in July. We bought the company on the Paris Stock Exchange in June, 2021 and sold it in June this year. There is also an American depositary receipt, but we have always owned it in France.
We didn’t originally buy it because of the Olympics; it was more because, on the infrastructure side, it owned the London Gatwick Airport – which it has since sold – and Europe was spending more on infrastructure then. We’re not looking at buying it back; we see better opportunities elsewhere.
This interview has been edited and condensed.