David Baskin's Top Picks: June 12, 2018

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

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MARKET OUTLOOK

As fundamental-based investors, our views on the outlook for the markets are largely driven by economic conditions and corporate earnings. We were impressed by the strong trends in both revenues and profits across a wide range of economic sectors in the first quarter and, with continued strength in the labour markets in both Canada and the U.S., we expect this to continue for the near future. We do have some concerns about inflation becoming a problem, but so far we've seen little evidence that tight labour markets are driving wages higher at a worrisome rate. There's no question that we'll continue to see increases in interest rates on both sides of the borders, and this will put pressure on interest-rate sensitive sectors of the market. We continue to see good investment opportunities in stocks.

TOP PICKS

ENERCARE (ECI.TO)

Enercare is a $1.2 billion provider of essential home equipment, chiefly rental water heaters. The company has a very stable customer base which enables it to pay a high and rising dividend, currently at about 5.5 per cent. As with most high-yield stocks, the share price has been under pressure as interest rates rise, giving new buyers a very attractive entry opportunity. We expect dividends to rise at between 5 per cent and 10 per cent yearly, making this a great income stock.

GENERAL MOTORS (GM.N)

General Motors has been working on electric and autonomous vehicles for years, but hasn't received the attention of such companies as Tesla. We believe it's poised to become a global leader in the next generation of cars and trucks and that its research in advanced vehicles will start to bear fruit as early as 2021. In the meantime, the stock offers an attractive yield of 3.4 per cent.

POWER CORPORATION (POW.TO)

Power Corp. has finally started to make some strategic moves, shedding its unprofitable newspaper division. The company can do much more to bring its stock price more in line with the value of its assets. Rising interest rates are a big positive for the life insurance divisionsm which will show better profits as a result. The company trades at about 80 per cent of our estimated net asset value and pays a dividend of 5 per cent.

PAST PICKS: MAY 17, 2017

CCL INDUSTRIES (CCLb.TO)
Stock split 5-for-1 on June 6, 2017.

• Then: $303.17
• Now: $64.72
• Return: 7%
• Total return: 8%

CINEPLEX (CGX.TO)

• Then: $51.94
• Now: $30.11
• Return: -42%
• Total return: -39%

MAGNA INTERNATIONAL (MG.TO)

• Then: $60.14
• Now: $85.04
• Return: 41%
• Total return: 45%

Total return average: 5%

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