After a disappointing 2015 when Canada was the worst performing developed market off 11%, was followed by a further fall in January when oil and commodities were hitting levels not seen for more than a decade, Having fallen 20% from its high, technically a bear market, the S&P/TSX Index has rebounded strongly, up almost 5% year to date, helped by the recovery in oil and gold. With the US Federal Reserve making it plain that interest rates will not rise as rapidly as many investors feared, and with the European Central Bank (ECB) moving towards negative interest rates and increasing the size of its Quantitative Easing (QE) programme from E60 bn a month to E80 bn, liquidity should support a further rise in the market.

The weaker Canadian dollar is finally boosting exports, while Canadian energy producers benefit from lower Canadian costs and a higher oil price. Although the housing market looks stretched in Toronto and Vancouver and the weak Alberta economy is affecting housing negatively, banks and financials appear well capitalized and able to handle higher loan delinquencies. While international concerns remain including the migrant crisis causing stresses in Europe, mid-east conflicts and China's attempt to manage slower growth, many stocks in developed markets have already sold off a lot, and emerging markets are selling at their lowest valuations for two decades. 

TOP PICKS:

Empire Company (EMPa.TO) 

Purchased on January 18, 2016 at $24.32
Recommended in Internet Wealth Builder

The owner of the Sobey's chain of supermarkets and a minority stake in Crombie REIT which owns many of their sites, Empire had adjusted earnings of $519m on sales of $29.3 bn in the year to May 1st 2015. Empire has sold off sharply in recent months as problems with the integration of its $5.8 bn purchase of Safeway's western Canadian supermarkets in 2013 mounted, announcing a $1.7 bn non cash write-down on the acquisition in the most recent quarter. Nonetheless, Sobey's management should succeed in turning round the operations, which were much desired when put up for sale and Empire sells for 17 times operating earnings and yields 1.8% making it one of the cheaper retail plays around.

Pason Systems (PSI.TO)

Purchased on February 25, 2016 at $17
Recommended in the Income Investor

Pason Systems is an oil service company whose products such as the Electronic Data Recorder and Pit Volume Totaliser provide data acquisition and wellsite reporting for energy companies. 60% of its $499m in 2014 revenue came from the US, 29% from Canada and 11% internationally and it has 60-95% market share in its fields. While revenues have halved over the last year, Pason remains profitable at an operating level, has no debt and raised its dividend as recently as January last year, giving it a 4% yield. While its management do not expect a recovery until 2017, Pason is a low risk way to play any recovery in the sector.

Unilever (UL.N)

Purchased on September 26, 2015 at US$41.62

The third largest consumer products company (Liptons, Dove, Hellmanns) with 59% of its revenues in emerging and frontier markets, Unilever has continued to deliver good growth in sales in emerging markets  in 2015, although reported growth was lower due to weakening currencies. Home care and personal care showed the fastest growth (3.5-4.5% in constant currency) offsetting slower growth in food in European developed markets. After a 6% increase in the dividend Unilever yields 3%.

Past Picks: Mar. 13, 2015

Novartis (NVS.N)

AGT Food & Ingredients (AGT.TO)

Dorel Industries (DIIb.TO)

Total Return Average : -3.98%