Andrew Pink, portfolio manager at LDIC Inc.

Focus: North American large caps, preferred shares and fixed income

MARKET OUTLOOK

Following severe volatility in the fourth quarter of 2018, markets have traded in a considerably more orderly fashion year-to-date.  Broad economic fundamentals remain positive, particularly in the U.S. and markets are no longer overreacting to geopolitical headlines.  We see sustained low unemployment, contained inflation, improving consumer confidence trends and relatively strong GDP growth in North America.  Combined with accommodative central banks and the potential near term end of a China-U.S. trade war, we remain optimistic for North American markets through the balance of 2019.

TOP PICKS

PARKLAND FUEL (PKI.TO)

Parkland has been firing on all cylinders, making strategic and accretive acquisitions, most recently acquiring a 75 per cent stake in Caribbean fuel distributor SOL for $1.6 billion.  We expect Parkland will leverage their distribution assets and create an international platform for future growth in the Caribbean region.  They have strong strategic positioning from vertically integrating business lines from refining assets to fuel distribution and convenience stores.  It’s still early days for this roll-up strategy but it has a significant runway for growth.

EXCHANGE INCOME CORP (EIF.TO)

Exchange Income is a diversified investment company, focused on acquiring high quality, established businesses within aerospace, aviation services and manufacturing.  This proven management team has demonstrated a unique investment discipline, delivering a five-year compound annual revenue and adjusted earnings before interest, tax, depreciation and amortization growth (EBITDA) of plus 22 per cent and plus 30 per cent respectively.  The company pays a six per cent annual dividend at a conservative 60 per cent payout ratio.  We believe the current valuation underestimates the stability of the underlying businesses and future earnings growth potential.         

GRANITE REIT (GRT_u.TO)

Formerly the leasing company for automotive parts manufacturer Magna International, Granite REIT has become a more diversified global leader in the industrial real estate space.  Granite continues to transform its portfolio through divesting non-core and concentrated Magna assets and acquiring higher-quality properties in a number of major distribution centres globally.  Following a recent successful equity offering, the company is very well positioned for future growth.  The valuation is attractive compared to its industrial peers.

PAST PICKS: MARCH 6, 2019

PARKLAND FUEL  (PKI.TO)

• Then: $37.32
• Now: $41.97
• Return: 12%
• Total return: 13%

BROOKFIELD INFRASTRUCTURE PARTNERS (BIP_u.TO)

• Then: $54.01
• Now: $57.28
• Return: 6%
• Total return: 7%

WPT INDUSTRIAL REIT (WIRu.TO)

• Then: $13.37
• Now: $13.73
• Return: 3%
• Total return: 4%

Total return average: 8%