Barry Schwartz, chief investment officer & portfolio manager at Baskin Wealth Management
Focus: North American Large Caps
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MARKET OUTLOOK

This has been a lousy summer for equity investors. The TSX can’t get any traction, and the S&P has given up most of its gains since the beginning of June. To add insult to injury, the Canadian dollar has grown very strong, cancelling out any good results from holding U.S. securities. Investors won’t find any sympathy in bonds, as the fear of rising interest rates has clobbered bond prices.

However, there is a lot to be bullish about.

Corporate earnings in the U.S. are set to grow by double digits in 2017, and for the first time in many years, we are seeing decent revenue growth. Canada’s economy is performing well despite continued weak energy markets and concerns about a slowdown in home prices. The U.S. economy should show a nice rebound in 2017, although a slowdown in auto sales and home construction bears watching. U.S. multinationals could see a lift due to rising foreign currency prices against the U.S. dollar. Industrial metal prices are up 60 per cent since January 2016. U.S. manufactures are seeing strong overseas demand, and Eurozone manufacturers have experienced a significant improvement in demand.

Global growth has picked up, and we are having no trouble finding lots of good companies trading at cheap to reasonable valuations.

We are positioning our portfolios accordingly. We have reduced our bond duration significantly, increased our fixed income weighting to securities that benefit from rising rates, and we are at our maximum exposure to equities across all client portfolios.

TOP PICKS

ALPHABET (GOOG.O)
It has a long runway of growth ahead of it, as it should continue to benefit from the shift toward digital advertising. Google has many monetization opportunities for emerging areas such as Maps and the Connected Home. There are many catalysts for further growth, including a repatriation of capital, accretive acquisitions, capital returned to shareholders in the form of buybacks and dividends and other bets which have yet to pay off. Google trades at a very reasonable valuation compared to its double-digit growth potential.

BECTON DICKINSON AND CO. (BDX.N)
This is the largest provider of one-time use medical products such as syringes, test tubes, catheters and skin dressings. It has been on a multi-year journey to embed itself as the complete package supplier to hospitals around the world. As a result, Becton Dickinson has made itself an indispensable source for health care providers. Becton’s debt level will be higher than normal for the next few years as it works to pay down the debt taken on to acquire C.R. Bard.

TFI INTERNATIONAL (TFII.TO)
It was hurt by weaker truckload pricing during the first half of 2017. It appears that pricing has improved significantly over the past couple of months, and TFI should benefit from a more normal pricing season. TFI has a shareholder-focused management team that thinks wisely about capital allocation. The company has been actively buying back its stock this year at much lower levels.
 

PAST PICKS: SEPTEMBER 1, 2016

TMX GROUP (X.TO)

• Then: $57.04
• Now: $66.34
• Rturn: 16.30%
• Total return: 19.59%

NATIONAL BANK (NA.TO)

• Then: $46.57
• Now: $55.39
• Rturn: 18.93%
• Total return: 24.09%

C.R. BARD (BCR.N)

• Then: $221.50
• Now: $319.35
• Return: 44.17%
• Total return: 44.47%

TOTAL RETURN AVERAGE: 29.38%
 

TWITTER: @BarrySchwartzBW
WEBSITE: www.baskinwealth.com