Alex Ruus, portfolio manager at Arrow Capital Management

FOCUS: North American Equities
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MARKET OUTLOOK

The second half of 2017 will likely see a continuation of the slow global economic recovery we have witnessed over the last several years, driven by solid growth from the world’s largest economies: the USA and China. Offsetting the solid economic growth somewhat will be gradual tightening of monetary policy by central banks. Unlike the last year, we are likely to experience some ups and downs during the coming year as we encounter some partisan politics in the U.S. that will impede the new president’s actual policy implementation. Overall, the economic backdrop should provide a good atmosphere for well-run leading companies (like those that we own in the Leaders fund) to continue to build shareholder value. We look forward to another profitable year for unitholders of the Leaders fund.

TOP PICKS

FREEHOLD ROYALTIES (FRU.TO)
Freehold Royalties is a leading owner of Canadian oil and gas royalties. It is one of the lowest cost producers of energy in Canada that pays a sustainable 4.3% dividend and trades at a discount to its intrinsic value. Last purchased on March 9,  2017 at $13.86 a share.

MICROSOFT (MSFT.O)
Microsoft is the world’s largest software company and an emerging leader in commercial cloud services. The market is undervaluing this leader, which has significant growth potential driven by the commercial cloud and its move to subscription and recurring revenues. The stock is undervalued, trading at 19 times earnings and a 2.1% dividend yield. Last purchased on February 2, 2016 at $53.51 a share.

ALARIS ROYALTY (AD.TO)
Alaris Royalty is a leading alternative financier to non-resource companies. The company has excellent management, a conservative balance sheet, and an excellent track record of building value and increasing dividends since its inception. We own it and believe the stock is undervalued at 12 times earnings and 7% dividend yield. Last purchased on December 16, 2016 at $23.68 a share.
 

PAST PICKS:  SEPTEMBER 6, 2016

ANTHEM (ANTM.N)

• Then: $124.29
• Now: $186.67
• Return: +50.18%
• Total return: +52.76%

Element Financial split into two companies:

ECN CAPITAL (ECN.TO) – since Sept. 28, 2016

• Then: $3.29
• Now: $3.95
• Return: +20.06%
• Total Return: +21.08%

ELEMENT FLEET MANAGEMENT (EFN.TO)

• Then: $11.01
• Now: $9.65
• Return: -12.40%
• Total Return: -10.74%

The combined total for both stocks is +10.34%. This is included in the Total Average Return.

GILEAD SCIENCES (GILD.O)

• Then: $77.88
• Now: $75.70
• Return: -2.79%
• Total Return: -0.04%

TOTAL RETURN AVERAGE: +21.02%