David Burrows' Top Picks: Sep. 19, 2018

David Burrows, president and chief investment strategist at Barometer Capital Management
Focus: North American large caps

MARKET OUTLOOK

U.S. equities remain in a long-term secular revaluation against other asset classes.

Despite a nine-day 10 per cent short-term correction which made its lows in early February, the current bull market is part and parcel of the early stages of reflation having seen a secular, generational low in interest rates and inflation globally in June  2016. Since then, for the majority of the time, sectors leading the market are those that benefit from a strengthening economy (the economically sensitive). Driven by earnings growth, capital spending, consumer confidence, deregulation, tax reform and animal spirits, markets appear to be able to continue to shake off near-term trade concerns with a view towards a continuation of improving business conditions beyond current concerns.

Biggest winners are likely to be the most economically sensitive groups (tech, industrials and energy), those that benefit from rising rates (financials) and also those sectors that are more domestically focused (healthcare and consumer discretionary).

Technically solid market breadth continues to point to broad-based equity market health. Multiple indexes, including the Value Line Arithmetic Index (an equal weight index of 1,700 stocks) have hit new all-time highs. This makes it clear that it isn’t simply a few of the biggest stocks carrying the indexes higher.

TOP PICKS

HESS CORP (HES.N)

JPMORGAN CHASE (JPM.N)

BOEING (BA.N)

PAST PICKS: AUG. 16, 2017

RIO TINTO (RIO.N)
Sold on March 13, 2018 at $52.45.

• Then: $45.24
• Now: $49.28
• Return: 9%
• Total return: 16%

FORTIVE CORP (FTV.N)
We still own this stock.

• Then: $66.15
• Now: $85.99
• Return: 30%
• Total return: 31%

E*TRADE FINANCIAL (ETFC.O)
Sold on September 6, 2018 at $55.73.

• Then: $40.42
• Now: $55.78
• Return: 38%
• Total return: 38%

Total return average: 28%