Full episode: Market Call Tonight for Thursday, June 14, 2018
Alex Ruus, portfolio manager at Arrow Capital Management
Focus: North American equities
After some stock market volatility to start 2018, prospects for the coming year looks solid. Both the U.S. and global economies are growing at their best rates since the great recession, unemployment is at its lowest level in a decade, and interest rates remain reasonable. As a growing U.S. economy leads the global economy forward, the backdrop for the coming year is solid.
The increased volatility so far this year is generating heartburn for some skittish investors, but ultimately leads to better investing opportunities for those willing to focus on buying solid leaders when the market provides the opportunities. Security selection is likely to be increasingly important over the coming year as we see some remarkable divergences in performance from different areas of the market. In this environment, the Leaders fund will produce solid returns.
MAGNA INTERNATIONAL (MG.TO)
The world’s second-largest independent auto parts supplier. Magna is an innovative global leader in several key auto parts segments, led by a strong management team, with a demonstrated record of shareholder value creation. The company is steadily building shareholder value and returns value to shareholders through a rising dividend accompanied by numerous share buybacks. We own the company and believe it is undervalued trading at eight times earnings and a two per cent dividend yield. Last purchased January 16, 2018 at $73/share.
FREEHOLD ROYALTIES (FRU.TO)
A leading owner of Canadian oil-and-gas royalties. One of the lowest-cost producers of energy in Canada that pays a sustainable five per cent dividend and trades at a discount to its intrinsic value. Last purchased June 6, 2018 at $12/share.
The leading U.S. health care insurance provider, strategically positioned to benefit from the need for cost control in the health care system. The company produces prodigious amounts of free cash flow, which translates into growing dividends and share repurchases to return capital to shareholders. The stock is undervalued at 14 times next year’s earnings. Last purchased April 25, 2018 at $230/share.
PAST PICKS: SEPT. 27, 2018
We own and continue to like all three stocks
MICROSOFT CORPORATION (MSFT.O)
ELEMENT FLEET FINANCIAL (EFN.TO)
UNITED PARCEL SERVICE (UPS.N)
FUND PROFILE: EXEMPLAR LEADERS FUND – CLASS F
PERFORMANCE AS OF MAY 31, 2018:
- 1 month: Fund* 1.79%, Index** 3.12%
- year: Fund* 4.21%, Index** 7.75%
- 3 years: Fund* 4.72%, Index** 5.36%
* Fund’s returns are based on reinvested dividends and are net of fees
** Index: S&P/TSX Composite Total Return Index
TOP HOLDINGS AND WEIGHTINGS
- Freehold Royalties Ltd.: 6.89%
- Microsoft Corp.: 6.77%
- Anthem Inc.: 6.43%
- Magna International Inc.: 5.07%
- United Parcel Service: 3.75%