David Cockfield, managing director & portfolio manager, Northland Wealth Management

FOCUS: Canadian Equities & ETFs

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MARKET OUTLOOK:

North American equity markets began to encounter resistance after the strong run to the end of March. While levels of bearishness are at record levels, the economic outlook remains positive and markets will likely work higher. With fixed income prospects negative, investors can find better value in equities, particularly high quality dividend paying stocks. While economic growth rates remain low, there seems little chance for recession, or any significant decline in corporate earnings, with the exception of the energy industry. Even in this sector, rising oil prices offer hope of better times to come.

Top Picks:

TD Bank (TD.TO)

The second largest Canadian chartered bank, that has long excelled in developing its retail banking footprint, a stable part of the Canadian banking sector. Over past years TD has acquired banking operations in the U.S. to the point it has more branches in the U.S. than in Canada. Given that TD has significant experience in digital banking, and fin tech in general, the U.S. operations should prove more profitable and face less competition than TD faces in Canada. Short selling by U.S. investors has depressed the prices of all the Canadian banks, offering Canadian investors a buying opportunity. TD has a safe dividend yielding 3.89 percent and a past record of regular dividend increases. Last purchased in May @ $57.50.

BMO Low Volatility U.S. Equity ETF (ZLU.TO)

This low volatility BMO ETF gives investors exposure to a portfolio of 100 U.S. large cap stocks that have low sensitivity to market volatility. The portfolio is rebalanced in June and reconstituted in December. The expense ratio is a low 0.33 percent and the BETA (sensitivity to markets) is 0.74. The portfolio’s four largest sectors are 25.5 percent Utilities, 24.2 percent Consumer Staples, 17.7 percent Health Care and 10.3 percent Consumer Discretionary. This ETF has moved sideways since late 2015 as investors become concerned about the potential for a slowdown in the U.S. Better markets should cause this ETF to break out to new highs. Last purchased in May @ $29.28.

Baytex Energy Corp (BTE.TO)

This Canadian oil stock has sold off significantly from the highs of well over $40 in late 2014. The company has heavy but pumpable oil production in Canada. In the U.S. however, the company has excellent oil shale properties in the prolific Eagle Ford play. A $50 per barrel price for oil should bring these properties back into production. While the company has significant debt, the majority of it is not due until 2021 and beyond. For those investors who can accept the risk and believe that the price of oil is headed higher, this stock has potential. Last purchased in May @ $6.15.

Past Picks:­ May 22, 2015

Power Financial (PWF-T)

• Then: $36.82
• Now: $31.93
• Return: -13.28%
• TR: -9.19%

Brookfield Property Partners (BPY.UN-T)

• Then: $28.48
• Now: $31.31
• Return: +9.94%
• TR: +16.88%

BMO Low Volatility US Equity ETF (ZLU-T)

• Then: $25.30
• Now: $29.09
• Return: +14.98%
• TR: 17.23%

Total Return Average: +8.31%

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