{{r.fundCode}} {{r.fundName}} {{r.series}} {{r.assetClass}}

You are currently viewing the Canadian website. You can change your location here.

Terms and conditions for Canada

About this podcast

As many regions across North America begin to reopen their economies, how companies operate and provide services will certainly have a different look and feel. Stu Kedwell, Co-Head, North American Equities, RBC Global Asset Management, offers his perspective on what traditional companies should be mindful of when making the move online, and how they can make the most out of digital real estate. (Recorded June 23, 2020)

Transcript

Hello and welcome to the Download. I’m your host, Dave Richardson, and we’re joined by Stu Kedwell, the co head of North American Equities at RBC Global Asset Management for Stu’s days. Stu, welcome to the podcast again.

Morning, Dave. Thanks for having me. Thanks to everyone for listening.

I know a lot of investors are watching the markets in both Canada and in the US and as a result of Covid-19, so many people working at home, so many behaviours being forced to shift by the self-isolation, quarantines that are going on around North America. Now we’re re-emerging from them, but while the quarantine, there were some areas of the market, particularly around technology, that have been big winners. From your perspective, Stu, as the economy reopens, as people start going back to work, do you think these areas are going to continue to be the winners? Are we going to see some other areas emerge? How do investors put all this together and think about it?

It’s a great question and something that we spend a lot of time thinking about. And you really have to almost go through company by company. As you point out, so far the stock market has really rewarded a bunch of companies that have really no exposure to anything that might be hurt by legacy issues of Covid and also have tools for what people perceive to be the new economy. I think the hardest question for those stocks — for there’s no question that they will grow — is whether or not the growth lives up to the very strong expectations in their stocks. That’s a different question. Where we find a lot of interest right now, we kind of ask ourselves the question: I remember growing up and someone would say, well, why do we do that, that way? And someone would say, well, we’ve always done it that way. And, you know, Covid kind of threw that under a bus. A lot of things got changed very quickly. And some of those things will have real persistence. And the stock market has been successful at trying to seek out winners and losers. Things like movie theaters and commercial real estate, there’s going to be some challenges for some of these assets because how we use those businesses might really change. It’s not to say that they won’t be useful. It’s just whether or not they will generate enough cash to pay for a return on the old values. And that’s really a question. The one area that we do find quite interesting is the acceleration in the digitization of the economy. It’s going to have big implications for financial services, for health care, for all sorts of service delivery. And what we might find, coming up the other side, using some of these digital experiences, is that the productivity of those businesses can really accelerate. One of the terms we’re using is digital real estate. While you may not go to a bank branch as frequently as you did, you might be on your app ten times a day. So how do you use that app to sell your services, to market your business, to provide advice? Those things are really going to change, but there’s going to be a lot of opportunities for traditional businesses as things reshape themselves.

And we were talking before about just that idea. If you go back to the origins of the Internet and the tech bubble of the 1990s — which many investors listening will remember — and a lot of excitement around some of these tech names, some of the ultimate winners were old and large corporations that figured out how to put these digital technologies in place and create different client experiences. Because of the effectiveness of those companies, in terms of being strong managers of their businesses with new technology, they came out as big winners out of the technological innovation.

No question, because they bring brands to the table. They bring people, management, employees and they bring resources. They have cash. So when you come at these businesses from a competitive standpoint, unless your first initial offering is so spectacular that it unseats them, they have a tremendous ability to take a small shot in the arm and say, wow, we’re going to get at that. And once they get at it, it’s pretty powerful on the other side. So, you know, we really think about those three attributes, an increasing research and development, your tech spend, those become assets to drive the future of your business versus, in the past, what some people thought as expenses to just drive processes inside your business. They’re going to drive new opportunities.

Wow. So a lot of things for investors to think about. And for professional investment managers such as yourself, these are the kind of things — these trends that are emerging out of any crisis or any particular period of innovation — these are things you constantly have to keep in mind to keep your portfolio ahead of the game. Stu, that was really insightful. Thanks again for your time.

Great. Thanks, Dave.

Disclosure

Recorded June 23, 2020

Please consult your advisor and read the prospectus or Fund Facts document before investing. There may be commissions, trailing commissions, management fees and expenses associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. RBC Funds, BlueBay Funds and PH&N Funds are offered by RBC Global Asset Management Inc. and distributed through authorized dealers in Canada.

This report has been provided by RBC Global Asset Management Inc. (RBC GAM Inc.) for informational purposes as of the date noted only and may not be reproduced, distributed or published without the written consent of RBC GAM Inc. Additional information about RBC GAM Inc. may be found at www.rbcgam.com. This report is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. RBC GAM Inc. takes reasonable steps to provide up-to-date, accurate and reliable information, and believes the information to be so when provided. Past performance is no guarantee of future results. Interest rates, market conditions, tax rulings and other investment factors are subject to rapid change which may materially impact analysis that is included in this document. You should consult with your advisor before taking any action based upon the information contained in this document.

Any investment and economic outlook information contained in this report has been compiled by RBC GAM Inc. from various sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM Inc., its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM Inc. and its affiliates assume no responsibility for any errors or omissions.

All opinions and estimates contained in this report constitute RBC GAM Inc.'s judgment as of the indicated date of the information, are subject to change without notice and are provided in good faith but without legal responsibility. Interest rates and market conditions are subject to change. Return estimates are for illustrative purposes only and are not a prediction of returns. Actual returns may be higher or lower than those shown and may vary substantially over shorter time periods. It is not possible to invest directly in an unmanaged index.

A note on forward-looking statements:

This report may contain forward-looking statements about future performance, strategies or prospects, and possible future action. The words "may," "could," "should," "would," "suspect," "outlook," "believe," "plan," "anticipate," "estimate," "expect," "intend," "forecast," "objective" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties about general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.

® / TM Trademark(s) of Royal Bank of Canada. Used under licence.

© RBC Global Asset Management Inc., 2020