
Dealing with the new administration in Washington won’t be easy, but it may offer opportunities for Canada and for investors. So says Darren Coleman’s guest Dennis Mitchell [pictured left] on the latest episode of the podcast, Two Way Traffic.
Mitchell is CEO and CIO of Starlight Capital, which is a wholly-owned subsidiary of Starlight Investments, a global real estate investment and asset management firm based in Toronto.
Mitchell advises investors to take President Donald Trump “seriously, but not literally.” In lieu of the on-again-off-again tariffs, he singled out an industry like auto manufacturing. “It would take decades for the U.S. to replicate Southern Ontario auto manufacturing,” Mitchell said, implying this won’t happen anytime soon. He also said Canada’s biggest challenge right now involves inter-provincial trade barriers and that Trump presents an opportunity to get this right and diversify our domestic economy. With an eye to prudent investing, the discussion with Coleman and Mitchell explored the following …
- Investors should take a hard look at technology because the Trump administration will give the sector carte blanche over the next four years.
- Don’t forget Canada has what the world needs in terms of energy, valuable minerals, water, etc.
- Investing in the right sector but with the wrong company is a mistake which is why it’s best to seek professional advice.
Here’s a link to the full podcast …
https://podcasts.apple.com/ca/podcast/two-way-traffic-with-darren-coleman/id1494816908
Darren Coleman
Today I’m joined by my friend, Dennis Mitchell, CEO and Chief Investment Officer for Starlight Capital in Etobicoke, Ontario. He’s been a fixture of the Canadian investment and U.S. investment landscape for a long time. He’s regularly on BNN and CNBC and has been a successful investor in North America. We’re going to talk about Canada and what we do. We’re dealing with the Trump tariff tantrum and we have a lot of concern, not just in Canada, but globally. Is President Trump using tariffs as a bit of a stick to get his policy decisions implemented? So I want to talk about your impression as a very successful investment manager. How much should we be worrying about this? What action are you taking, or should investors be thinking about? I’ll open it there and get your thoughts and comments and what should we be focused on.
Dennis Mitchell
With Trump, a number of people have said you have to take him seriously, but not literally. And I think that’s great advice for markets as well. Two ways to evaluate Trump’s impact on markets. The first is longer term: what can you expect versus the trajectory we were on before. So longer term, what you can expect is less regulation and more growth. You can expect a focus on manufacturing domestically, driving more foreign investment into the United States. And a focus more on fossil fuels and less on renewable energy. So that’s sort of a longer-term playbook.
As for an investment strategy, to the extent that you need to tweak, it should be tweaked along those longer-term trends. In the short term, you have to ask yourself: How is this? How does Trump usually operate? To put it charitably, he operates chaotically. I think you have to use the volatility that he creates around things like seizing the Panama Canal, acquiring Greenland, turning Gaza into a resort, and implementing tariffs against allies. You have to use the volatility of those announcements and those actions to invest along your long-term trajectory. Because long term we should all be investing in high-quality businesses that are driving free cash flow growth. To the extent that Trump volatility creates a sell-off in any of those types of companies, that’s where you should be allocating your capital to capture those outsized returns that his chaos and volatility create.
Many people have not read The Art of the Deal, where he gives a guidebook to the way he’s going to play the game, and it might be a little too early to pick definite winners and losers. There are certain winners and losers, for example, like hybrid cars or electric cars. It looks like some of the subsidies might be going away. It looks like they’re on a real mission to eliminate a lot of government spending, which makes sense given the size of the debt. Are there certain industries right now that you like?
Dennis Mitchell
I think based on not just Trump, but who he’s put in Cabinet, you can look at energy, the traditional fossil fuel energy industry, as an area that’s going to be attractive going forward. Clearly, technology. The tech oligarchs have all lined up, not just at his inauguration, but they’ve all lined up to pay fealty to Trump and work with him. And you have to look at anything being manufactured outside the United States that could conceivably shift to the U.S. I say conceivably, because I think a lot of people are concerned about the auto industry in Canada. It would take decades to replicate the supply chain of southwestern Ontario within the continental US. So that is not an industry investors, in the short and intermediate term, have to worry about in terms of replication and capital flowing outside of the country and into the U.S.
I mentioned his Cabinet, RFK Jr. taking over Health and Human Services. That is of concern for healthcare businesses. You have to think there will be continued downward pressure on drug costs. There will be increased review and oversight and downright skepticism around some of the treatments that exist out there, whether it’s women’s reproductive health, vaccines, even the vaccines that Trump himself spearheaded and created for COVID 19. You have to be concerned about increased oversight and questioning and potential outright bans of some of these industries and some of these treatments and technologies based on who Trump has put in various Cabinet positions. But I think technology and energy, specifically, are two areas that will benefit from a Trump administration. The previous administration was very focused on renewable energy and was not necessarily a big fan and partner of the tech oligarchy.
Darren Coleman
Let’s spend some time on those two industries. On the energy side, in his first day, he said ‘Drill baby drill’ in his speech. So that was pretty clear that fossil fuels are going to be around a long time. And he’s signing agreements with places like Japan for liquid natural gas. Canada had a shot at those agreements, and we decided not to. So if we’re going to see a focus on the energy sector, is that good for American energy companies, or positive for Canadian energy companies?
Dennis Mitchell
I think it’s good for both and the simple reason is that the demand for energy in the U.S. in particular is almost insatiable and will not be met without significant investment on both sides of the border. So if we take a step back, the energy industry, the traditional fossil fuel energy industry in North America, has gone through a significant restructuring over the last 20 years. Gone are the days where guys are going door-to-door and raising capital to drill.
Darren Coleman
Passenger mines, that kind of thing? Continue Reading…