Gordon Reid, president and CEO of Goodreid Investment Counsel

Focus: U.S. equities
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MARKET OUTLOOK
It’s ironic that in a $25-trillion public market that so little attention is paid to the primary support mechanism: corporate earnings. After five quarters of earnings growth declines, ending in late 2016, the corporate profit train is again on the rails. First-half earnings grew at a solid double-digit rate year over year and 2017 is expected to achieve a 10 per cent+ outcome. Valuations stay reasonable if the fundamentals of a market keep pace with price, so pay as much attention to the “E” as the “P” in the P/E ratio.

TOP PICKS

DYCOM INDUSTRIES (DY.N) – Last purchased June 2017 at $89
Dycom is a telecom services company, capturing a large share of the massive amount of work to upgrade wireline networks to accommodate greater bandwidth. Recent financial reports showed lumpy results as customers front-loaded annual budgets and consolidation in the telecom space led to a pause in spending. What is lost in the market’s reaction is the decades-long initiatives that will likely result in an annual 15 per cent+ growth in EBIT for Dycom.

HONEYWELL (HON.N) – Last purchased August 2017 at $137
Honeywell is a premier U.S. industrial, well positioned in aerospace, home and building products and performance materials. A strong balance sheet, impressive profitability, and reasonable valuations make HON a good holding. Finally, a new CEO as well as some activist agitation will likely create a strong push for optimal results.

MORGAN STANLEY (MS.N) – Last purchased August 2017 at $46
Morgan Stanley has successfully transitioned from an emphasis on institutionally-focused fixed income business to a wealth management platform (44 per cent of revenues). Earnings are projected to rise 21 per cent in 2017 and 15 per cent in 2018. Goodreid believes that these accelerated growth rates support valuations of 1.2 times book value and 13 times earnings.
 

PAST PICKS: SEPTEMBER 7, 2016

BOEING (BA.N)

• Then: $132.64
• Now: $236.59
• Return: 77.61%
• Total Return: 83.03%

DYCOM INDUSTRIES (DY.N)

• Then: $86.51
• Now: $80.54
• Return: -6.90%
• Total Return: -6.90%

HOME DEPOT (HD.N)

• Then: $132.79
• Now: $149.67
• Return: 12.71%
• Total Return: 14.66%

TOTAL RETURN AVERAGE: 30.26%