Rob Lauzon, chief investment officer, Middlefield Capital Corporation

FOCUS: North American equities

MARKET OUTLOOK:

Investors are facing a myriad of macro risks including tightening monetary policy, ongoing supply chain concerns, the war in Ukraine and lockdowns in China. As a result, sentiment has deteriorated to extremely low levels, with the AAII bull-bear survey metric recording its lowest reading since March 2009. 

 While we remain cognizant of these headwinds, we believe they are being reflected in current share prices and the risk/reward setup is becoming increasingly attractive for the second half of the year. The inflation narrative is ultimately the most important factor for stocks right now and we are optimistic it will improve in the coming months.

The current correction (and bear market in technology stocks) is providing a decent entry point for long-term investors to add exposure to dividend-paying equities with growing earnings.

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TOP PICKS:

Topaz Energy (TPZ TSX)

Last bought on Feb 24th at $18.85

Topaz is a unique “hybrid” royalty and energy infrastructure company. Its diverse asset base operated by quality counterparties underpins its growing cash flow and dividends per share. Due to the non-operated nature of their royalties and infrastructure, TPZ avoids much of the inflation occurring in the economy while their revenue benefits from strong activity and prices.

George Weston (WN TSX)

Last bought on March 4th at $147.15

We like George Weston currently as a low-risk way to gain exposure to both Loblaws (retail) and real estate (Choice Properties REIT). We expect the discount to NAV to narrow over the coming quarters as WN starts to return capital to shareholders at a faster pace using its NCIB. The stock makes sense for investors seeking exposure to equities but with lower volatility, especially during the current environment.

Cargojet (CJT TSX)

Last bought on March 22nd at $164.25

Canada’s economy is robust and Cargojet gives investors exposure to overnight cargo deliveries across the country. Management recently reiterated its positive outlook for the year – specifically e-commerce volumes remain solid. The dividend was just increased 10 per cent and a normal course issuer bid was announced.

 PAST PICKS: May 28, 2020

PepsiCo (PEP NASD)

• Then: $132.29
• Now: $173.77
• Return: 31%
• Total Return: 38%

 Pfizer (PFE NYSE)

• Then: $38.18
• Now: $49.76
• Return: 38%
• Total Return: 45%

 Enbridge (ENB TSX)

• Then: $44.55
• Now: $56.80
• Return: 27%
• Total Return: 41%

Total Return Average: 41%