Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management

FOCUS: North American mid and large caps
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MARKET OUTLOOK
As long-term value investors, we need uncertainty to create value for our clients. We cannot deliver exceptional returns for our clients if we invest in securities that lack volatility. Without volatility, we would never be able to buy low or sell high. If you insist upon having certainty in your portfolio, invest in cash and invest in GIC’s after taxes, inflation and fees. Investing in certainty may lead to a negative return on your portfolio. In our opinion, the average investor should overweight high quality dividend growing stocks. Bonds and other fixed income products do not offer a high enough return, so we do not consider adding more of them for our clients’ accounts. As it happens, there are a number of high quality companies, especially in the U.S. that are trading near their 52-week lows. We believe this is an excellent time for investors to put cash to work.

TOP PICKS

MOLSON COORS (TAP.N)
NTM P/E: 19x | NTM EV/EBITDA: 11.8x | Dividend Yield: 1.6 per cent
Molson’s acquisition of MillerCoors is finally complete and Molson is now the third largest brewer in the world. The merger of Miller and Molson Coors should lead to substantial cost savings and synergies for Molson. The company’s main focus for the next couple of years will be to reduce its debt and then focus on dividend growth and tuck-in acquisitions. 

MICROSOFT (MSFT.O)
NTM P/E: 19x | EV/EBTIDA: 11.3x | Dividend Yield: 2.6 per cent
Historically, we have liked Microsoft for its exceptionally high market share in traditional PC products such as Windows and Office. Recently, CEO Satya Nadella has repositioned Microsoft as one of the leaders in cloud computing while reducing focus on consumer devices. As a result, the market has rewarded the company with a premium valuation multiple. We think Microsoft has a long runway of growth, and as it generates substantial free cash flow, it can make future acquisitions.

MORGUARD CORP (MRC.TO)
Price/NAV: 60 per cent | Dividend Yield: 0.3 per cent
Morguard is a real estate operating company that owns a diversified portfolio of hotels, multi-unit residential properties, office units and retail. Unlike REITs, Morguard retains most of its cash flow for property development, acquisitions and share repurchases. So it is better positioned than REITs as a real estate play in an environment of potentially rising interest rates. Morguard has a good record of growing its net asset value and we believe the stock is trading at a significant discount to its intrinsic value.
 

PAST PICKS:  NOVEMBER 23, 2015

MOODY’S CORP (MCO.N)

• Then: $104.17
• Now: $98.06
• Return: -5.86%
• Total Return: -4.75%

EXPRESS SCRIPTS (ESRX.O)

• Then: $85.44
• Now: $67.24
• Return: -21.30%
• Total Return: -21.30%

ACADIAN TIMBER (ADN.TO)

• Then: $18.75
• Now: $17.22
• Return: -8.16%
• Total Return: -3.11% 

TOTAL RETURN AVERAGE: -9.72%
 

TWITTER: @BarrySchwartzBW
WEBSITE: www.baskinwealth.com