Christine Poole, CEO and managing director at GlobeInvest Capital Management
Focus: North American large caps
Strengthening broad-based economic growth has been the primary driver behind buoyant global equity markets, with many broad indices posting double digit returns year-to-date. While this current cycle is admittedly one of the longest in history, it is the slowest and against a backdrop of global monetary accommodation. Subdued inflationary pressures suggests a gradual removal of stimulative measures by central banks to ensure self-sustaining growth remains on track.
U.S. tax reform will boost corporate earnings, making stock valuations somewhat more palatable and encourage capital investment which would help stimulate industrial activity. The U.S. consumer is in excellent shape with the debt to net worth ratio at a 17 year-low, which bodes well for continued consumption spending in 2018. The rise in net worth is attributable to strong equity market returns and rising home prices.
Manufacturing and services surveys continue to signal firm expanding activity. Sentiment gauges are near cycle highs and the employment situation is healthy. Indication of a pending recession remains low. For risk tolerant investors, equities remain the preferred asset class.
Unilever is one of the world’s leading suppliers of personal care (38 per cent of sales), food (24 per cent), home care (19 per cent) and refreshment (19 per cent) products with sales in over 190 countries and reaching 2.5 billion consumers a day. Its global brands include Dove, Axe, Tres Semmes, Vaseline, Lipton, Knorr and Hellmans. With 57 per cent of its sales coming from emerging markets, Unilever is well-positioned to benefit from the growing middle class in these regions. Unilever provides an attractive dividend yield of 2.7 per cent. Recent purchase price in the US$57 range in November 2017.
Enbridge is a leading North American oil and gas pipeline, gas processing and natural gas distribution company. Enbridge accounts for 28 per cent of crude oil transported, 20 per cent of natural gas transported and 12 per cent of natural gas processed in North America. Liquids pipelines account for 50 per cent of earnings, gas transmission and midstream are 35 per cent, gas utilities are 13 per cent and renewable power is 2 per cent. With 96 per cent of its cash flow underpinned by long-term commercial agreements, Enbridge’s operations are stable and predictable. Integration of the Spectra acquisition is advancing well and synergy capture is on track. Enbridge recently confirmed 10 per cent annual dividend growth through to 2020. Enbridge offers an attractive yield of 5.4 per cent. Recent purchase price in the $46 range in November 2017.
CHARTWELL RETIREMENT RESIDENCES (CSH_u.TO)
Chartwell is the largest provider of seniors housing communities in Canada. Demand for seniors housing is robust, driven by an aging population and increased life expectancy. According to Statistics Canada, the 75+ years seniors’ population in Canada will more than double from 2.5 million in 2016 to 5.5 million in 2036. The industry is relatively fragmented, with the top 15 retirement home operators accounting for 43 per cent of total suites. Chartwell offers retirement homes across the continuum of care: independent living (5 per cent), independent supportive living (72 per cent of suites), assisted living (5 per cent), long term care (17 per cent) and memory care (1 per cent). Chartwell provides an attractive income yield of 3.6 per cent. Recent purchase price in the $15.40 range in November 2017.
PAST PICKS: DECEMBER 14, 2016
ROYAL BANK OF CANADA (RY.TO)
- Then: $90.67
- Now: $101.94
- Return: 12.42%
- Total return: 16.58%
JOHNSON & JOHNSON (JNJ.N)
- Then: $114.99
- Now: $143.01
- Return: 24.36%
- Total return: 27.57%
- Then: $817.89
- Now: $1,058.45
- Return: 29.41%
- Total return: 29.41%
TOTAL RETURN AVERAGE: 24.52%