Bryden Teich, partner and portfolio manager at Avenue Investment Management
Focus: North American equities

MARKET OUTLOOK

Investors around the world have had very few places hide over the last few months as virtually all asset classes experienced heightened volatility and negative returns. We believe that certain sectors within Canada offer better value than the U.S. stock market more broadly. The earnings yield on the TSX offers very compelling value versus other parts of the world and we remain focused on capturing this yield.

Investor sentiment in Canada also remains very negative and the recent sell-off in oil prices and continued issues over lack of pipelines and oil differentials have only made the situation worse. We’re hopeful that some of this negativity with regards to the energy sector clears up during 2019 as the Canadian oil differential starts to close towards more normal levels.

Concerns over trade and tariffs, rising interest rates, and a slowing global economic growth picture are issues that are expected to continue into 2019. For these reasons we believe it’s important for investors to remain a defensive posture while owning a diversified portfolio of high quality companies with consistent earnings and cash flow.

TOP PICKS

WPT INDUSTRIAL REIT (WIR_u.TO)

WPT is an industrial REIT based in the U.S. It yields roughly 6 per cent and has very high quality industrial assets throughout AMERICA. It has recently internalized their management structure, which is a significant positive. The management team is now fully aligned and executing on its property development strategy.

VERMILION ENERGY (VET.TO)

Vermilion has diversified exposure to Brent and European natural gas pricing, which provides them with strong balanced cash flows. We like the diversified nature of the business and their strong management team, which has a track record of executing on strategic M&A opportunities. They completed a few tuck-in acquisitions in 2018 that are set to help them grow production over the next few years. The shares are now yielding over 8 per cent and we believe they represent good value at these levels.

BROOKFIELD BUSINESS PARTNERS (BBU_u.TO)

Brookfield Business Partners is the private equity arm of Brookfield Asset Management and it focuses on acquiring companies in the business and industrial services sectors. They have a very strong management team, which made a number of smart transactions over the past year to increase value for unitholders. They have ample liquidity and an active global deal pipeline that should create room for further growth.

PAST PICKS: JUNE 1, 2018

CVS HEALTH (CVS.N)

• Then: $64.07
• Now: $80.42
• Return: 26%
• Total return: 27%

CENOVUS ENERGY (CVE.TO)

• Then: $13.45
• Now: $9.18
• Return: -32%
• Total return: -31%

BANK OF AMERICA (BAC.N)

• Then: $29.40
• Now: $28.45
• Return: -3%
• Total return: -3%

Total return average: -3%

WEBSITE: www.avenueinvestment.com