Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management
Focus: North American large caps

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MARKET OUTLOOK

It's been a year of lots of "concerns." North Korea, rising interest rates, rising inflation and the possibility of an inverting yield curve have roiled the markets. The concern du jour is the talk of a trade war. No question: a prolonged trade war could have wide ranging impacts. But it’s possible that some of these fears are already priced in. For example, China’s stock market is in a bear market, auto manufacturers stock prices have been pummeled and major exporters of industrial goods like Boeing have seen their stock prices crater.

In the meantime, corporate profits in the U.S. are set to reach record levels in 2018 without a commensurate rise in stock prices. Business conditions are also conducive for strong growth.

The most recent U.S. data showed increasing auto and truck sales, rising factory orders, record levels of truck tonnage and rail car loadings, expanding manufacturing and service levels, and employment continuing to be solid. Most importantly, we believe valuations are attractive and we've been using market pullbacks and pullbacks on individual stocks to increase our client’s equity exposure.

TOP PICKS

MORGUARD (MRC.TO)

Morguard CEO K. Rai Sahi is one of the most underrated capital allocators in Canada. Since 2008, Morguard has grown its net asset value by over five-fold by using its cash flow to make smart discounted acquisitions and wisely timed redevelopments of existing properties. Despite this success, Morguard shares trade at a huge discount to the value of its properties. We believe that Morguard’s stock is one of the biggest bargains in North America.

MAGNA INTERNATIONAL (MG.TO)

Magna is one of the largest automotive suppliers in the world. It's done a terrific job repositioning its portfolio from a “legacy supplier” to benefit from the growth areas within automotives, such as autonomous vehicle technology, sign detection and vision cruise control, and automatic braking. We acknowledge that Magna is at risk if NAFTA falls apart, however, the stock has already pulled back since hitting an all-time high last month. Magna has a clean balance sheet, generates an enormous amount of cash flow and, its shares offer great value at eight-times earnings.

JPMORGAN (JPM.N)

JPMorgan allows investors to benefit from a strong U.S. economy as well as rising interest rates. In our opinion, JPMorgan is the best-run bank in the world. As a result of the most recent stress test, the bank is allowed to buy back over $20 billion of stock and increase its dividend by over 40 per cent.

PAST PICKS: JUNE 13, 2017

AIG (AIG.N)

• Then: $64.23
• Now: $55.46
• Return: -14%
• Total return: -12%

ROGERS COMMUNICATIONS (RCIb.TO)

• Then: $62.75
• Now: $64.26
• Return: 2%
• Total return: 6%

DISNEY (DIS.N)

• Then: $106.56
• Now: $106.03
• Return: -0.4%
• Total return: 2%

Total return average: -1%

TWITTER: @BarrySchwartzBW
WEBSITE: baskinwealth.com