Investor pessimism has abated somewhat over the past few months, with North American equity markets recovering from their February 11th lows, e.g. TSX up 13.5% and S&P 500 up 14.5%.  In Canada, an expansionary fiscal policy is augmenting an accommodative monetary policy to stimulate the economy. Exports should continue to benefit from an improving U.S. economy and a relatively weaker dollar.  The U.S. economy continues to grow, albeit at a subdued pace.  Job growth remains healthy, with the unemployment rate in the 5.0% range.  Manufacturing activity is improving, with the March ISM Manufacturing Index back in expansionary mode at 51.8.  The ISM Non-manufacturing Index strengthened in March to 54.5. The U.S. consumer is in good shape.

The dual headwinds of declining crude oil prices and foreign currency should moderate in the back half of this year, when year-over-year U.S. corporate profit growth is expected to turn positive.  The earnings inflection should be a catalyst to propel equity markets upwards.   

TOP PICKS:

Chartwell Retirement Residences (CSH_u.TO)

Chartwell is the largest provider of seniors housing communities in Canada. The seniors housing industry is attractive due to demographic trends of rising longevity and an ageing demographic.  According to Statistics Canada, the seniors’ population (65 years+) in Canada will increase from 16% of the overall population in 2015 to 25% by 2031. Chartwell provides an attractive income yield of 4.0%.

Walt Disney Co. (DIS.N)

Disney is a media conglomerate and premier content provider, comprised of Cable Networks & Broadcasting (53% of operating income), Parks & Resorts (21%), Studio Entertainment (13%) and Consumer Products (13%).  Its strong global brand portfolio including Disney, ESPN, Pixar, Marvel, and Lucas Film supports a multi-platform strategy to exploit content and intellectual property across Disney’s business segments.  Disney provides a dividend yield of 1.4%.      

Alphabet (GOOGL.O)

Alphabet is a global technology company, providing the world’s leading search engine, Google, and dominating in both global desktop and mobile search engine queries.  Google benefits from the secular shift to online/internet advertising given its 70%+ share in global search ad revenue.  With internet advertising accounting for about 35% of global advertising budgets, significant secular growth for this media channel remains over the foreseeable future.

Past Picks: Apr. 15, 2015

Mondelez International (MDLZ.O)

PPG Industries (PPG.N)

Manulife (MFC.TO)

Total Return Average : +2.50%