Christine Poole's Top Picks: Dec. 13, 2019

Christine Poole, CEO and managing director at GlobeInvest Capital Management
Focus: North American large caps

MARKET OUTLOOK

The stealth rally in stock markets is pricing in a phase 1 U.S.-China trade deal accompanied by a gradual tariff rollback. While yet to be finalized, a limited trade agreement appears to have been reached.

So far the U.S. economy is withstanding the global slowdown as evidenced by a healthy employment situation. Trade uncertainty has negatively impacted business fixed investment and exports with manufacturing activity as measured by the ISM manufacturing index contracting the past four months. The service sector, however, continues to hold in, anchored by job gains and low unemployment rate.

After reducing interest rates three times this year, the U.S. Federal Reserve is now on hold against a backdrop of strong labour market conditions and contained inflation which is running below its 2 per cent target. Nonetheless, monetary policy by central banks including the U.S. remains accommodative. More importantly, interest rates are expected to remain low for an extended period of time.

Trade relations and geopolitical events remain the key factors impacting markets. Economic growth is expected to remain positive albeit somewhat muted next year, supportive for continued corporate profit growth.

TOP PICKS

DOLLAR TREE (DLTR:UW)
Recently purchased around $90 in December 2019.

Dollar Tree is an operator of discount variety retail stores under two banners: Dollar Tree and Family Dollar. Dollar Tree stores offer merchandise at a fixed price point of $1 (or $1.25 in Canada) while Family Dollar stores cater to low- to lower-middle income consumers, selling merchandise with price points ranging from $1 to $10. Elevated costs in its most recent quarter have temporarily depressed margins, creating an attractive point for the stock.

FORTIS (FTS:CT)
Recently purchased around $53 in December 2019.

Fortis is a diversified North American electric and gas utility company, generating its cash flow primarily from regulated assets. Following its acquisition of ITC Holdings Corporation, a fully-regulated U.S. electric transmission utility company, over half its revenues are from the U.S. Fortis is a stable cash flow generator, posting 46 consecutive years of annual dividend increases. Supported by a backlog of low risk, regulated projects, Fortis has targeted average annual dividend growth of 6 per cent through 2024. Fortis offers a yield of 4.2 per cent.

HOME DEPOT (HD:UN)
Recently purchased around $215 in December 2019.

Home Depot is the leading home improvement specialty retailer with close to 2,300 retail stores in the U.S., Canada and Mexico. The home improvement market is very fragmented and Home Depot is well-positioned to grow its 15-per-cent share in the U.S. The company is near the end of its multiyear investment program to buildout its online, digital and delivery platform to support continued future growth. Home Depot provides a dividend yield of 2.6 per cent.

PAST PICKS: DEC. 11, 2018

PEMBINA PIPELINE (PPL:CT)

• Then: $43.39
• Now: $46.91
• Return: 8%
• Total return: 14%

MICROSOFT (MSFT:UW)

• Then: $108.59
• Now: $154.34
• Return: 42%
• Total return: 44%

XYLEM (XYL:UN)

• Then: $65.44
• Now: $77.47
• Return: 18%
• Total return: 20%

Total return average: 26%

TWITTER: @christine_globe
WEBSITE: globe-invest.com