Full episode: Market Call for Tuesday, September 11, 2018
Christine Poole, CEO and managing director at GlobeInvest Capital Management
Focus: North American large caps
Economic data, indicators and surveys confirm solid U.S. economic growth is poised to continue for the balance of the year. Despite escalating trade tensions, overall business activity reportedly remains strong, as both the ISM Manufacturing and Non-Manufacturing indexes advanced higher in August, with the former reaching a 14-year high.
The U.S. labour market also continued to improve in August, along with stronger wage growth. The employment data should reinforce the Federal Reserve’s policy view for gradually higher interest rates.
In Canada, the recent jobs report was mixed, with employment unexpectedly down in August. Uncertainty surrounding U.S. trade negotiations and negative sentiment towards foreign investment in the energy sector overhang the Canadian economy.
While the pace of growth in the global economy has moderated from earlier this year, it remains positive for now. The impact of trade wars and strengthening U.S. dollar on corporate profits will be closely monitored.
Recently purchased at the $71.90 range in September 2018.
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 their 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 2.9 per cent.
ROYAL BANK (RY.TO)
Recently purchased at the $103.50 range in September 2018.
Royal Bank’s diversified business mix consists of personal and commercial lending (48 per cent of earnings), capital markets (22 per cent), wealth management and insurance (24 per cent) and investor and treasury services (6 per cent). Geographically, Canada accounts for 60 per cent of revenues, the U.S. for 23 per cent and international for 17 per cent. Royal Bank’s dividends are expected to grow at a similar pace to earnings growth. The stock provides investors with a current dividend yield of 3.8 per cent.
CHARTWELL RETIREMENT RESIDENCES (CSH_u.TO)
Recent purchase price at the $15.10 range in September 2018.
Chartwell is the largest provider of seniors housing communities in Canada. Demand for seniors housing is robust, driven by an ageing population and increased life expectancy. According to Statistics Canada, the Canadian population of seniors over 75 will more than double from 2.7 million in 2018 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 of suites), independent supportive living (72 per cent), assisted living (5 per cent), long term care (17 per cent) and memory care (1 per cent). Chartwell provides an attractive income yield of 3.9 per cent.
PAST PICKS: SEP. 12, 2017
UNITED TECHNOLOGIES (UTX.N)
- Then: $109.86
- Now: $132.90
- Return: 21%
- Total return: 24%
BROOKFIELD ASSET MANAGEMENT (BAMa.TO)
- Then: $48.27
- Now: $55.61
- Return: 15%
- Total return: 17%
TD BANK (TD.TO)
- Then: $66.68
- Now: $79.20
- Return: 19%
- Total return: 23%
Total return average: 21%