Katherine Owen of Mackenzie Investments.The Globe and Mail
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While many investors are betting the economy will sidestep a severe downturn, money manager Katherine Owen remains cautious.
“I think current expectations might be a little too optimistic. There’s still risk in the global economy,” says Ms. Owen, a portfolio manager at Mackenzie Investments in Toronto, who helps oversee about $18-billion in assets with the firm’s global equity and income team, including the $5.5-billion Mackenzie Global Dividend Fund, led by Darren McKiernan.
“We’re respectful of consensus expectations,” Ms. Owen adds, “but we don’t want to make big macro calls when managing portfolios. Instead, we focus on stock picking. We try to hedge our bets by being defensive and offensive in what we own.”
The fund’s top holdings today include Microsoft Corp. MSFT-Q, at about 5 per cent, followed by SAP SE SAP-N, JPMorgan Chase & Co JPM-N, Amazon.com Inc. AMZN-Q and Broadcom Ltd. AVGO-Q, at roughly 2.5 per cent each. The fund has returned 13.4 per cent over the past 12 months. Its three-year annualized return is 8 per cent while its five-year annualized return is 11 per cent. The performance is based on total returns, net of fees, as of Jan. 31.
Globe Advisor spoke with Ms. Owen recently about what she’s been buying and selling and a stock she wished she owned more of:
Describe your investing style.
We want to buy high-quality companies that are among the best businesses in the world. We look for well-established companies that are leaders in their industry and have a long track record of growth and creating shareholder value. Our style is flexible; we can go anywhere in the world, in any sector. We also look for companies that do well in all economic environments.
What’s your take on the current market environment?
Market sentiment has swung over the past year, with many investors expecting a soft landing or no landing. We’re positioned more cautiously given the economic data showing that manufacturing is deteriorating and U.S. consumer spending may have peaked for the time being. A lot of data are backward-looking, and there’s a lag effect in how higher interest rates affect economic growth – and we could be in the beginning stages of seeing that right now. Also, sentiment can change very quickly.
What have you been buying?
Ferguson PLC FERG-N, a plumbing and heating products distributor, is a stock we bought a few months ago. It’s a transformation story. It started as a plumbing and heating products supplier based in the U.K., and while it was a U.K.- and European-centric business, the gem was its U.S. operations. Over the past five years, the company has divested its lower-return business in the U.K. and Europe and redomiciled to the U.S. It’s not as familiar to U.S. investors, but we think it’s a matter of time before U.S. investors get to know the company and understand what a great business it is. Ferguson is a leader in the industry, and there’s a lot of room for it to grow through consolidation and the ongoing need for people and companies to upgrade their aging heating and plumbing infrastructure.
Colgate-Palmolive Co. CL-N is a more defensive name we bought last year. Not only does it sell toothpaste and other household products such as Irish Spring soap, Speed Stick deodorant and, of course, Palmolive dish soap, but also Hill’s pet food. Its pet food division is a growing business, especially today, given the number of new dog owners since the pandemic, including my household.
What have you been selling?
Novo Nordisk NVO-N, the pharmaceutical company behind popular diabetic and weight-loss drugs Ozempic and Wegovy, is a company we’ve been trimming. The stock has done extremely well for us over the past several years – we’ve owned it since 2016 – so we’ve been trimming it along the way to take some profits. We still hold a large position, but we wanted to do some risk management.
We sold Corteva Inc. CTVA-N, the large U.S. agricultural chemical and seed company. We inherited the stock when it was spun out by DuPont in 2019. Its products help make farming more efficient, including protecting crops from weather and insects. We like it because it’s high quality, but the stock performed well and the valuation wasn’t as attractive. We sold it gradually and finally exited the stock in the fourth quarter of last year.
Name a stock or sector you wish you owned or hadn’t sold.
We wished we didn’t sell as much of our position in Novo Nordisk as we did, even though we still own a lot. The goalposts keep going higher because of the company’s impressive earnings. The number of benefits for its weight loss drugs also keeps getting larger, including for the heart and how there’s potential that it could help with tobacco addiction.
What advice do you have for new investors?
It’s important to have a globally diversified portfolio. Many great companies exist in Canada, but the market is concentrated in more economically sensitive sectors such as commodities and financials. So, when building a portfolio, don’t just include diversity by sector but also by geography.
This interview has been edited and condensed.
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Editor’s note: An earlier version of this article stated in the headline that Katherine Owen is an advisor. She is a portfolio manager.