Transcript of the Hebb Advisory Group’s July 2025 Conference Call

[00:00:05.960] - Intro

Good afternoon, ladies and gentlemen, and welcome to this month's conference call with Derek Hebb from CIBC Wood Gundy. Please be advised that this call is being recorded. I would now like to turn the call over to Derek Hebb, Senior Wealth Advisor. Please go ahead, Mr. Hebb.

 

[00:00:21.460] - Derek Hebb

Thank you, Louise. Today, we're joined by Bryce Walker, President of Connor, Clark & Lunn Funds in Toronto. Bryce is responsible for the strategy and direction of the business, including working with financial institution clients and top-tier investment advisory teams to develop and deliver new and innovative investment strategies that meet evolving client needs. Prior to his current role, Bryce was Senior Vice President, Business Development at CC&L Funds. Before joining the firm in 2012, Bryce was a Regional Vice President with TD Asset Management. Preceding that, he spent 11 years at CI Investments, the last six in the role of Vice President, Sales and Marketing. Bryce holds a Bachelor of Commerce from the University of Guelph and is a CFA Charterholder. Bryce, thank you for joining us this afternoon.

 

[00:01:15.510] - Bryce Walker

Thanks, Derek. Really appreciate the opportunity to speak with you today.

 

[00:01:21.300] - Derek Hebb

Likewise. It's great to have you on the call. Thinking back, actually, to 2023, that was the last time we featured CC&L on my conference call series. And I think on that basis, it would be helpful for our listeners if you could just give us a quick refresher on your firm and how you would describe CC&L's investment philosophy.

 

[00:01:47.940] - Bryce Walker

Yeah, thanks. And again, I really appreciate being a part of the call today. And you know, Connor, Clark and Lunn is maybe less well known with individual investors, but we would be a core Canadian institutional money manager. We're actually today Canada's largest privately-owned asset management firm. That is, we're partner-owned and have no outside shareholders. We manage portfolios for some of the world's largest of the most sophisticated institutional investors. And we partnered with CIBC Wood Gundy about a decade ago to deliver our institutional investment approach to individual investors. And it's frankly been an amazing relationship. But we believe being independent, privately-owned ensures that our interests are aligned with that of our clients over the long term. Investors don't or shouldn't invest for the short-term, and we don't think we should be paid on the short-term. Our investment professionals don't get paid short-term performance bonuses. We get paid based on the equity ownership in the business. Frankly, as you know, we work in a business of intellectual capital. That is, we have no assets other than the people who work here. We think being privately-owned and to have our investment professionals, owners of the business, is the best way to attract, motivate, and retain the highest quality people, and to make sure that we're aligned with the interests of our clients.

 

[00:03:09.600] - Bryce Walker

That is, we do well when first and foremost, clients are happy with the performance and service we provide. So, that's just a quick overview of us as a firm. From an investment philosophy perspective, we manage a number of portfolios for CIBC, but however, for today's call, we're going to be focusing on our Equity Income & Growth portfolio. This portfolio really seeks to be a better solution for Canadian dividend investors. And by better, we mean the portfolio looks to deliver an attractive sustainable dividend yield plus growth to outpace inflation, which is obviously very relevant in today's environment, and to do so with less risk than the TSX; that is the Canadian stock benchmark. And over time, this has resulted in a really compelling return profile where we've participated, but not necessarily outperforming where the markets are doing really, really, really well. But typically, we've added the bulk of our value when markets are misbehaving. That is, we're down less than the market. We've done a good job of protecting capital when markets are, what we'd say, misbehaving. This is a really attractive return profile we find for most Canadian individual investors because they just tend to be a lot more sensitive to a dollar lost than a dollar gained. We've been managing this portfolio for 20 years, and the benefit of this approach has been seen over that period. But this is definitely evident during the April drawdown as our portfolio was down much less than the market.

 

[00:04:39.860] - Derek Hebb

Thank you, Bryce.

 

[00:04:41.320] - Bryce Walker

Yes, hopefully that provides some context for who we are and how we think about our Equity Income & Growth portfolio.

 

[00:04:46.830] - Derek Hebb

That's great. That's helpful. And certainly markets misbehaved during the month of April. It was a very challenging period for the markets, driven by uncertainty around trade wars and tariffs. That said, we've seen stock markets bounce back in a meaningful way. Is the bad news behind us?

 

[00:05:10.800] - Bryce Walker

Yeah, it's a great question, and you're right. You think back to April, and we had lots of volatility around the tariffs. But really, since the end of April, we've had a really significant rally in equities. And I would say our view going forward, let's say over the next 12 months, is cautiously optimistic. We definitely recognize there are some positive signs, but also a number of risks that we're watching carefully. So let me first address the positives. We recognize that economic growth is slowing, but still remains positive in both Canada and the US. Frankly, the probability of a recession has decreased from earlier this year. And that's largely because we're now past the point of peak tariff and geopolitical risk. So while they're still present, and we're still trying to figure this out, they're definitely not as heightened, and there's definitely not as much uncertainty, specifically around tariffs, as there were in March and April when we saw the big volatility and the big drops in the equity market. In addition, we continue to see supportive monetary policy. That is, in general, lower interest rates, especially from where we were a year ago or even longer.

 

[00:06:26.340] - Bryce Walker

And we also continue to see supportive fiscal policy. That is, we expect more government spending, both in Canada and the US, which should bode well for positive economic growth. We also continue to see, I'd say, a very resilient consumer. And as you know, consumer accounts for the majority of both the Canadian and US economy. So that is a strong point. And in general, employment continues to be pretty resilient as well. And I would say, finally, on the list of positives, we would expect companies to start spending again. Because of all the uncertainty in the first half of the year, companies were really hesitant to spend. And when there's lots of uncertainty, as a CEO of a company, you don't want to commit millions of dollars to a project when you don't know what the landscape is going to look like in a month or two months or three months. But now that we're past that peak concern around tariffs, we would expect to see strong capital expenditure in AI, obviously, but also in other sectors as businesses become more comfortable as some of that uncertainty, starting from the first half, dissipates in the second half of the year.

 

[00:07:34.800] - Bryce Walker

So, those would be the list of the things that we're positive about. That being said, we do recognize that there is still some downside risks. Again, most significantly, is still the unknown impact of tariffs. So, we're a couple of months into this process, and it's still not obvious what the day-to-day impact is. So that's something that we're watching very closely and something that can change, obviously, very quickly. In addition, we also continue to see concerns around US debt levels. Especially in the US, debt continues to grow at unprecedented levels, and that's likely to be a drag on future growth. So, those would be the two biggest concerns from an economic perspective. When we think about from a market perspective, we expect earnings growth in Canada and the US to be positive over the next year. So that's a good thing for stocks. But we do know that equity valuations, or the price investors are willing to pay for stocks, are at or near all-time highs. So if you look at the S&P 500, the largest US equity market, it's at its 99th percentile in terms of its valuation range over the last 20 years. So stocks, especially in the US, look expensive from a valuation perspective.

 

[00:08:53.540] - Bryce Walker

And I would say, just finally, we continue to be concerned about the resurgence of inflation and the potential for higher rates going forward. So a bit of a mixed bag, but I would say, cautiously optimistic on the outlook for stocks over the next year. But do expect, given some of those risks, that volatility is likely to be more persistent as well.

 

[00:09:13.840] - Derek Hebb

Thanks, Bryce. So as a Canadian-focused portfolio, what does this mean for the Canadian stock market?

 

[00:09:22.440] - Bryce Walker

Yeah, I would say we are actually taking a bit of a more medium to longer term view. We're actually quite excited about the outlook for Canadian equities relative to US equities. I think we all know that US stocks have outperformed Canadian stocks for much of the past decade, but we think there's a number of tailwinds for Canadian equities going forward. And first and foremost would be valuations. I talked about that just very briefly, but Canadian equities do look more attractive from a valuation perspective than US stocks at this point. So that's a positive. I'd also say we believe that we're likely to be in a higher for longer environment. That is, inflation and rates are likely to be higher this cycle than they were last cycle. And again, not saying that inflation is going back to 8 or 9% that we saw post-COVID, but we do believe it's going to be higher than what we saw during the global financial crisis in 2008. And that's due to a number of structural factors. The first one would be we've seen globalization peaks. So we're now seeing a move towards on-shoring. Moving production closer to home, that's inflationary.

 

[00:10:31.180] - Bryce Walker

Demographics are challenging in the developed world. That is lots of older people retiring, less people in the labour force. We've seen a lot of number of strikes. So that is inflationary. Meanwhile, over the last decade, we've had an underinvestment in commodities. As the global economy continues to try and transition to net zero, that's inflationary. And we're all seeing, unfortunately, aside from the more global conflict and aside from obviously the terrible human cost, war is unproductive and inflationary. So all of those forces are inflationary. And so we, as I said, expect inflation and interest rates to be higher this cycle than they were last cycle. But can't actually, given the makeup of our economy, typically does well in an inflationary environment. And that's because we have lots of exposure to resources, and commodities typically do well in an inflationary environment. So we think the backdrop for Canadian equities look attractive from that perspective. Also, a big part of our economy is oligopolies. That is, industries tend to be dominated by a handful of players. So, while this may not be great from a competitive perspective, it's great from a stability perspective. And, frankly, these businesses also tend to have pricing power given this dynamic.

 

[00:11:49.100] - Bryce Walker

And I would say the last thing in favour of Canadian Equities is we now have a leadership in place that appears to be more growth-oriented than previous leadership. So, we actually think Canada is pretty well-positioned given those factors.

 

[00:12:05.120] - Derek Hebb

Thanks. So, how are you positioning your portfolios based on this outlook?

 

[00:12:12.040] - Bryce Walker

Yeah, great question. We would say the objectives of this portfolio, that is of providing consistency and stability, as well as a dividend profile that can outpace inflation, are definitely well-suited to an environment where we would expect volatility to be more persistent. So we're actually thinking our portfolio is ideally positioned for this type of environment. But in terms of portfolio positioning, I would say we continue to be focused on resilient and stable growth businesses. So, looking for companies that can generate growth regardless of what's happening from an economic perspective. I would say also with respect to our portfolio, every stock in our portfolio pays a dividend. But what we're really looking for is we want dividend stocks that can grow their dividends over time. Dividend stocks tend to outperform over time with less risk than non-dividend stocks. But we want to find stocks that can grow their dividends faster than inflation. And that's because dividend growers outperform when volatility is rising. And that dividend growth is really important in an environment of higher inflation, because as your dividend increases, that's going to outpace inflation and generate real purchasing power. So today, if you look at our portfolio, again, every stock and it pays a dividend, but we would expect over the next year, about 80, 90% of those stocks to increase their dividends.

 

[00:13:37.760] - Bryce Walker

So, continue to be focusing on high quality, stable businesses that can generate growth, regardless of what's happening from an economic perspective and can pay that attractive sustainable dividend, but grow it to outpace inflation.

 

[00:13:56.360] - Derek Hebb

Thanks, Bryce. This has been a timely discussion. You've covered a lot of important points, especially given the market dynamics and your outlook. So thank you for that. In the interest of time, this will conclude today's call. If anyone has questions about the information that Bryce discussed, please contact me. Thanks to everyone for listening in. And Bryce, thank you again for joining us on this month's call.

 

[00:14:22.910] - Bryce Walker

Thanks, Derek. Appreciate the time.

 

[00:14:24.710] - Derek Hebb

Take care.

 

[00:14:26.270] - Bryce Walker

Take care.

 

Transcript of the Hebb Advisory Group’s May 2025 Conference Call

 

[00:00:07.480] - Intro

All participants, thank you for standing by. The conference is ready to begin. Good morning, ladies and gentlemen, and welcome to this month's conference call with Derek Hebb from CIBC Wood Gundy. Please be advised that this call is being recorded. I would like to turn the call over to Mr. Derek Hebb, Senior Wealth Advisor. Please go ahead, Mr. Hebb.

 

[00:00:29.570] - Derek Hebb

Thank you, Patrick. Today, we're joined by Murdo MacLean, Client Investment Manager with Walter Scott and Partners in Edinburgh, Scotland. Murdo, who I last interviewed in February of 2024, joined Walter Scott in 2006 and spent 12 years on the research team focused on Japanese and US equities. He joined the Client Service Team in January 2019. Prior to Walter Scott, Murdo lived and worked in Japan for six years. He holds a BA (Honours) in Japanese and Marketing from the University of Stirling and Level One Japanese language proficiency test. Murdo, thank you for joining us this morning.

 

[00:01:11.650] - Murdo MacLean

My pleasure, Derek. How are you?

 

[00:01:13.390] - Derek Hebb

I'm doing well. It's great to talk to you again.

 

[00:01:17.130] - Murdo MacLean

I can't believe it's been a year already.

 

[00:01:18.860] - Derek Hebb

It's incredible. And there's been so much happen since we last spoke, in particular, year-to-date, to say the least. You know, Donald Trump's second term as President of United States - it began just over three months ago. What have we learned so far from this experience?

 

[00:01:43.760] - Murdo MacLean

Yes, indeed. It feels a lot longer than three months ago. I would say, first of all, I think that heading into the new presidency, I think there was a feeling that Donald Trump would be good for markets, good for the stock market for example, given that there were some signs of that in his previous presidency. I think there was a view that he ultimately wants the economy to kickstart, wants investment into the economy, and that that would generally be good. Obviously, what we've seen in the last few weeks, particularly, has been something much more on the opposite side of that. I think that has really come from the lack of visibility that has come from the White House around what potential tariffs might look like. And we've seen a lot of volatility. We've seen Liberation Day, which was billed as providing significant clarity following several weeks of toing and froing with Canada, with Mexico, and so on. But it was supposed to be a day in which we would all have that clarity that we've been craving. And of course, it set markets into a bit of a tailspin, and then culminating several days later with a postponement for a further three months, which initially was celebrated by markets.

 

[00:03:17.880] - Murdo MacLean

But ultimately, I don't think there's a huge cause for celebration when all that he really did was extend that period of uncertainty. And then now what we're seeing is dribs and drabs on a daily basis about specific trade relationships, around the Fed independence. It's really not helping what we're focused on, which is real companies. And so clearly, we continue to hope that there will be further clarity, that there will be a degree of common sense that will prevail. I think everyone is willing to accept Donald Trump's way of doing things is different from others, but ultimately, something as serious and significant as this needs to be handled very carefully, and perhaps thus far, it has not been handled particularly carefully. But I think what we do know is he was at least serious about what he said with regards to jobs being coming back to the US, continuing with the US first narrative. So I think we know that he wasn't bluffing. We just don't know across individual industries necessarily or countries with which they have trade relationships, what the likely outcome will be. So I would love to give you a definitive answer, but I think that's probably the most honest thing I can say at this stage.

 

[00:04:43.370] - Derek Hebb

Yeah, of course. It makes sense. Thanks, Murdo. If you look over the last couple of years, AI has really driven the markets. Have we now entered a different period for the markets?

 

[00:04:59.690] - Murdo MacLean

Yeah, I think you're right, certainly, that this time last year, it was really all that people we're talking about was AI. There's a lot of excitement around a pretty small number of companies that were deemed to be the most obvious initial beneficiaries of the massive Capex that has needed to be spent in order to ready the global economy for a deployment of AI. Since, really the back end of last year, we've seen a number of those companies go through a period of underperformance, not so much because their results have been poor, but just because it felt to some extent as if that trade was a bit long in the tooth. To use a sports analogy, some of those valuations were a bit over their skis. We all know that back in the days of the first phase of the Internet being rolled out, there was a lot of money being spent, but it took a while, or some cases never came through, that there was a return on the end of that. And I think the more money that was spent, the gradual realization was at the market level that we're not seeing returns yet here.

 

[00:06:15.290] - Murdo MacLean

So how much longer can you spend without returns coming on the other side of that? And then we've also obviously witnessed the deep seek announcement, and whether that was truly accurate or not, it did place an element of doubt into the market around the dominance of, say, those US tech companies. What are the barriers to entry, really, for those businesses? Can the Chinese compete here? They clearly want to. And just enough to place a seed of doubt in investors' minds, particularly when they've been asked to pay pretty high multiples. So all of that, I think, in addition to just investors belief in the US market had run very hot for very long, and that we've seen a little bit of that unwinding. By no means do I think that that means that AI is not going to be everything that it was billed to be. I just think that such as was the case of the Internet, it's going to take a bit of time to see the returns on that investment. It's going to take a bit of time for the infrastructure to be deployed and for companies in the real world and consumers for that matter, to reap the benefits of this.

 

[00:07:31.550] - Murdo MacLean

We, as a house right now, are continuing to hold a lot of the companies that we think are very well exposed to AI. AI, fortunately, was never the primary reason for investing in those companies, but it was their position in the supply chain for semiconductors, for example, that meant that whatever the application was, those companies are well positioned. And then at the margin, we've been discussing a few more newer ideas that we also think are long term winners in this space that might have come unstuck in the recent volatility. So yes, there's question marks around global supply chains. Yes, there's question marks around tariff. But I think something of the significance of AI is something to be very excited about. I just think that we were saying this a year ago that you're not going to get an immediate return, and it's not going to line up perfectly. But if you're in the right companies, they will be there, thereabouts when things start to really move here. And so I think we continue to be excited about the space. Valuation consideration is very important. Identifying the real winners, those that hold the keys, if you will, to the future of this is exactly what we want to try and make sure we're exposed to. So, yeah, I think often things come and go. I think AI is probably almost certainly here to stay, but it's going to take a little bit longer to play out as the market is hoping for.

 

[00:08:59.000] - Derek Hebb

Thank you, Murdo. If you look year to date, it's a great example of the importance of diversification, which we always emphasize in portfolio construction, and that includes geographic diversification. On that note, with Europe starting the year strongly, is US exceptionalism dead, would you say?

 

[00:09:25.390] - Murdo MacLean

So a couple of things on this, I think I would say. Ultimately, valuation must never be forgotten as being crucially important in whatever you invest in. The US has historically traded at a premium to the international markets for many, many years, usually 20, 30, 40 % premium, something of that magnitude. Towards the end of last year, the relative valuation of the US versus the rest of the world was pretty much at an all time high as well as concentration levels in markets around that seven or so companies in the US. And at some point, that has to give because otherwise, investors are completely dispensing with common sense and just continuing to buy the states on whatever valuation. That's not sustainable. So we saw that hitting around 80% premium over international, and a US that accounted for about 75 % of the global index, which was just incredibly high, too high, really, as we now know. And I think it's begun to return, not back to where it was, but certainly has come back down quite a bit, which makes sense. So a degree of mean reversion has been seen. We would always impress upon our clients the need for geographic and sector diversification, but not to the extent where you lower the quality of your portfolio.

 

[00:10:51.830] - Murdo MacLean

So I think there's a balance to be struck there. And I believe that we want to invest in countries where there are companies that have a comparative advantage, wherever that may be. If the best company in robotics is Japanese, then that is the one that you might want to own. If the best business in pharmaceuticals is in Switzerland, that's the one that you probably want to own. But of course, providing the valuation is supportive. So I think the cheaper the US gets, the more interesting the US becomes, ultimately, if you are focused on quality businesses, growth businesses for the long term. We will continue to make sure that the portfolio is geographically diversified because we look far and wide for those best companies with those comparative advantages. But I don't think that we are significantly altering the nature of the portfolio because the US got to those levels. We were on the way and have been on the way in the United States for pretty much all of our history. And so to that extent, I think we were expecting a bit of a pullback at some point here. But if that provides opportunities and they happen to be American and that's the right thing to do in the portfolio, then doubtless, we will deploy some capital to add those businesses to the portfolio just in the same way that we would for any region.

 

[00:12:09.280] - Derek Hebb

Thanks, Murdo. So what is your general outlook for Walter Scott's global equity portfolio?

 

[00:12:17.680] - Murdo MacLean

Yeah. So in the long term, we're always asked, are you bullish? Are you bearish? We would always say, when it comes to the market, we're pretty neutral. It's hard to say, because the market encompasses so many businesses, so many industries, the good, the bad, the ugly. It's difficult to form an aggregate view of all of that that's going on. But we have a 50 stock portfolio, the global growth portfolio, And it's a great deal easier to come to a long term conclusion on that because we've deliberately selected those businesses. They're in there for a reason, and that's because we think they're in possession of really dominant market positions. They're in great industries, and they happen to be driving the growth in those industries in many ways. So we can always be more bullish on the portfolio than we can be on the market. Even though you tend to hear on a daily basis people talking about the market, what do they even mean by that? It's too broad a cross-section of companies to make generalizations. As it pertains to the rest of this year, it's extremely hard. If you listen to company CEOs at the moment on the earnings calls, some of them are giving no guidance for the rest of the year.

 

[00:13:31.200] - Murdo MacLean

Some of them are painting a pretty bleak picture, but dearly crossing their fingers that things are a bit better than that. So in the near term, there's no doubt uncertainty is very high. It's rarely been poorer in terms of visibility in my career. That should not dissuade a long term investor. These are also the points where you must hold your nerve. These are the points where you are given opportunities to pick up great businesses that will do the job for you in the long term. So very often the moments to buy and certainly to hold are those moments that seem the most bleak, if you will. So I think we're bullish on the portfolio, particularly if we go into an environment where economic growth is low or negative and where companies in possession of more sustainable growth start to be rewarded for that. That quality, that sustainability of their growth, that great profitability, that balance sheet, that dividend that has been somewhat overlooked in favour of the high flying red hot thematic stocks, they'll come back again. And when they do, I think this portfolio is exceptionally well positioned, and the team is working super hard right now to make sure that we take as many opportunities as we can from what's on offer right now in the equity space.

 

[00:14:47.460] - Derek Hebb

That's great, Murdo. We'll leave it there. This has certainly been a timely and valuable discussion. In the interest of time, this will conclude today's call. If anyone has questions about the information that Murdo just discussed, please contact me. Thanks to everyone for listening in. And Murdo, thank you again for joining us on this month's call.

 

[00:15:10.730] - Murdo MacLean

Thank you, Derek. It's always a pleasure. And thank you very much to you and your clients for the support.

 

[00:15:15.260] - Derek Hebb

Thank you so much. Take care.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disclaimers

 

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2025.

 

Murdo MacLean is Client Investment Manager with Walter Scott and Partners. The views of Murdo MacLean do not necessarily reflect those of CIBC World Markets Inc.

 

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