David Baskin, president of Baskin Wealth Management
Focus: North American large caps
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MARKET OUTLOOK

We remain confident the worldwide economic expansion will continue during 2018 and we don’t see any signs of inflation running out of control. Our view is that central banks have been, if anything, overly cautious in increasing rates before there’s been hard evidence of inflation in either prices or wages. Corporate profits in North America and Europe seem likely to have a record year in 2018 and as rates remain low, are still relatively more attractive than bonds. The recent market sell-off has given rise to some bargains, particularly in the interest-sensitive and financial sectors.

TOP PICKS

KEYERA PIPELINE (KEY.TO)
NTM P/E: 19x EV/EBITDA: 11x Dividend yield: 5.5%

Keyera’s shares are a good deal at four-year lows. They’ve been under pressure from the capital raise and lack of presence in the Montney region, as well as poor sentiment overall for the Western Canadian Sedimentary Basin. The management runs the business conservatively and has plenty of growth projects over the next three years, including $900 million of growth spending in 2018, which will continue to sustain the dividend growth that’s averaged eight per cent compound annual growth rate (CAGR) since 2003. 

SCOTIABANK (BNS.TO)
NTM P/E: 10.6x Dividend yield: 4.3% P/B: 1.5x

Scotiabank shares have underperformed other banks due to its Mexico exposure, but we think it provides good value here. We like the Canadian banking sector as a whole, and want to highlight Scotiabank at a discount. Scotiabank’s international business in the Pacific Alliance is now around ¼ of the business, and is both more profitable and faster growing than Canadian banking, and is making acquisitions there including BBVA Chile, and Citibank Columbia. Scotiabank is also working hard to improve higher-margin digital banking where you don’t need a bank teller or physical location, which provides a nice tailwind.

CCL INDUSTRIES (CCLb.TO)
NTM P/E: 19x Dividend Yield: 0.8% EV/EBITDA: 11x

CCL Industries is the largest labeling company in the world and makes everything, including shampoo labels, McDonald’s Monopoly stickers, drug labels and Avery binders. CCL is the only company with the global footprint and scale to serve multinational consumer companies across the world. The management has also done a terrific job of making opportunistic acquisitions at very attractive multiples, having made around 30 acquisitions in the last eight years at an average valuation of 5.4 times EBITDA. The stock has been in a bit of a slump due to recent high input costs, and we think this is overly myopic and does not take into account the strong business model and capital allocation history.

PAST PICKS: FEB. 16, 2017

WALT DISNEY CO (DIS.N)

• Then: $110.71
• Now: $104.21
• Return: -5.95%
• Total return: -4.47%

CVS HEALTH (CVS.N)

• Then: $79.45
• Now: $70.11
• Return: -11.75%
• Total return: -9.46%

CANADIAN APARTMENT REIT (CAR_u.TO)

• Then: $31.91
• Now: $35.76
• Return: 12.06%
• Total return: 16.31%

Total return average: 0.79%

TWITTER: @DavidBaskinBWM
WEBSITE: baskinwealth.com