Full episode: Market Call for Wednesday, February 13, 2019
Christine Poole, CEO and managing director at GlobeInvest Capital Management
Focus: North American large caps
The rebound in stocks year-to-date can be attributed to receding volatility, optimism for a U.S.-China trade agreement and dovish commentary by central banks globally. The announcement that U.S. lawmakers have reached a tentative deal to avert another government shutdown has also buoyed investor sentiment.
Investors have also been reassured with Q4/18 earnings for the S&P 500 companies coming in largely as expected, on track for earnings per share (EPS) growth of 15 per cent year-over-year. EPS growth in 2019 is expected to slow to 5 per cent as the beneficial impact of U.S. tax reform is removed.
My takeaways from U.S. earnings reports based on management commentaries are that the U.S. economy is stable, supported by a healthy employment situation, the eurozone is weakening and the Chinese economy is slowing. The impact of tariffs and ongoing trade war with China is manageable (for now), with price increases being gradually implemented to offset higher input costs.
The cycle indicators we track don’t suggest a recession is imminent. Global economic growth (the U.S. and Canadian economies included) is decelerating, but the pace of growth is expected to remain positive.
Nonetheless, uncertainty surrounding trade wars and Brexit is dampening corporate and consumer sentiment and could eventually lead to decreased investment and spending, triggering a more pronounced slowdown. Positive resolution on these matters would be constructive for markets.
Recently purchased at $69.50 in February 2019.
Formed through the merger of Agrium and Potash, Nutrien is the world’s largest fertilizer producer and retailer of crop inputs and services to farmers. Synergy realizations are running ahead of original timeline. Proceeds from announced asset sales will provide cash flow for stock repurchase, higher dividends and global expansion of Nutrien’s agricultural retail network. Nutrien offers a dividend of 3.2 per cent.
PEMBINA PIPELINES (PPL.TO)
Recently purchased at $46.95 in February 2019.
Pembina is a diversified energy infrastructure company that operates pipelines, natural gas gathering and processing facilities and midstream businesses. The company is well positioned in the prolific Montney/Duvernay shale regions, with secured projects in place to support its future cash flow growth over the foreseeable future. Pembina offers an attractive 4.8 per cent dividend yield.
Recently purchased at $1,099 in February 2019.
Alphabet is a global technology company and the owner of the world’s leading search engine, Google, which dominates in both global desktop and mobile search engine queries. Google benefits from the ongoing secular shift to online advertising. Other future growth areas include Google Cloud, Waymo and YouTube.
PAST PICKS: FEB. 13, 2018
ALGONQUIN POWER (AQN.TO)
- Then: $12.70
- Now: $14.35
- Return: 13%
- Total return: 19%
TD BANK (TD.TO)
- Then: $71.39
- Now: $74.90
- Return: 5%
- Total return: 9%
- Then: $112.43
- Now: $103.57
- Return: -8%
- Total return: -6%
Total return average: 7%