Cole Kachur, senior wealth advisor at Scotia Wealth Management
Focus: Canadian equities

MARKET OUTLOOK

The recent market volatility isn’t uncommon as we get later in this cycle. I think the majority of the issues are short term in nature and should be seen as an opportunity to high grade into blue-chip equities that have been sold off in the past few weeks. It may also give investors an opportunity to look at markets that they may have missed out on, such as the U.S., or beginning to build a position in European or emerging markets. Overall, I still have a preference for equities to fixed income and think that there is better risk-to-reward in dividend-paying, growth investments versus fixed income in an increasing rate environment. The markets have rallied to end the year in both 2016 and 2017 due to the Trump bump and tax cuts. This year it’s less clear what could kickstart the rally, but I do expect that we see stronger markets in the next three to six months. There’s no shortage of Canadian and U.S. names that you could own and do very well on currently. It’s a great time to be building or adding to positions of blue chip names.

TOP PICKS

BCE (BCE.TO)

We have been buying BCE at recent market price. I like the sector as a way to get good income and growth potential. With a 5.8 per cent dividend yield and upside potential from current prices, I think it’s a name that most investors can own and tuck away in their portfolio. There are high barriers to entry in this space and, with technology continuing to advance, I think the BCE’s and other telecoms are in a really strong position.

BMO EQUAL WEIGHT U.S. BANKS HEDGED TO  CAD INDEX ETF (ZUB.TO)

There’s the ZBK and ZUB, which are basically the same, except that ZUB has a hedge. I still think that U.S. banks are a good way to play a rising rate environment and inflation increases. The ETF has come down 15 per cent from its most recent peak and has exposure to most of the larger-cap U.S. financials, which I like. I went with the hedged version as I’m pretty neutral on the CAD/USD right now and I would prefer just to have a pure play on the banks instead of risking dollar exposure.

ISHARES U.S. AEROSPACE & DEFENSE (ITA.TO)

I think it’s a good opportunity to get into the U.S. market if you’ve been under exposed. This ETF gives you a diversified way to own a number of companies that are leaders in the category. With the U.S. and other countries continuing to spend big on defense and aerospace, I think it’s an interesting market segment that we don’t have a lot of exposure to in the Canadian market.

PAST PICKS: OCT. 25, 2017

PEMBINA PIPELINE (PPL.TO)

• Then: $40.72
• Now: $43.80
• Return: 8%
• Total return: 13%

RECIPE UNLIMITED CORP (RECP.TO)
Formerly Cara Operations.

• Then: $25.20
• Now: $27.24
• Return: 8%
• Total return: 10%

EXCHANGE INCOME CORP (EIF.TO)

• Then: $32.01
• Now: $30.49
• Return: -5%
• Total return: 2%

Total return average: 7%