FOCUS: North American Equities

Market Outlook:

So far in 2016, the sharp declines and subsequent recoveries in the global stock market have been unsettling, but it’ll likely turn out to be transitory.  The advent of benchmark interest rate increase in the US is bound to create uncertainties for investors who have gotten used to a long period of lowering interest rates.  Coupled with the stagnant global economic growth and talk/adoption of negative interest rates outside the US, the outlook has been muddled and investor confidence shaken.  However, there is no imminent signs of economic recession worldwide, and global liquidity remains abundant.  The US economy is bouncing back from seasonal weakness and the employment picture keeps grow brighter.  Overall, the pullback in stocks has cleansed some valuation excess in the market and created buying opportunities in many.  Although volatilities are not likely to disappear near term, the risk and reward for the rest of 2016 is favourable.

TOP PICKS:

Magna International (MG.TO) 
Most recent purchase & price: Feb. 2016 @ $46.65. 
Magna is one of the largest auto parts suppliers in the world and has leading technology in many areas.  It has a global footprint and recently enhanced its exposure to the fast growing Chinese market beyond its traditional strength in North America and Europe.  With a good balance sheet, reasonable dividend yield and an auto cycle that’s still in full upswing, Magna has been unduly depressed by recent market volatilities and present a good entry point into a premier franchise. 

Sleep Country Canada (ZZZ.TO) 
Most recent purchase & price: Jan. 2016 @ $15.44. 
Well known for its cheeky jingo, Sleep Country Canada is the No. 1 mattress retailers in Canada.  With consumers’ increasing focus on health and wellness, good quality mattresses enjoy a broaden market.  In Canada, the decline of mid-tier department store retailers opens the door for incremental market shares for strong operator.  Sleep Country Canada has stepped up its powerful advertising campaign and expanded its offering to higher margin accessories.  Rejoining the public market less than a year ago, Sleep Country Canada is yet to be discovered by many investors as a dominant Canadian retailer. 

Dirtt Environmental (DRT.TO) 
Most recent purchase & price: Feb. 2016 @ $5.40. 
Dirtt (stands for “do it right this time”) is not your average prefabricated office furniture company.  Founded by industry veterans including Mogens Smed, Dirtt uses its proprietary 3D software to seamless integrate the design, manufacturing and installation process, ensuring on-time, on-budget experience.  It is leveraging its network of partners to expand its reach globally, and create solutions to new segments like health care, lodging and residential.   Despite the drag from weaker energy industry orders, Dirtt remains one of the best companies that grows organically in a big market.  Recent corrections only makes Dirtt more attractive.

Past Picks: May 14, 2015

Whistler Blackcomb (WB.TO)

Transcontinental (TCLa.TO)

DIRTT Environmental Solutions (DRT.TO)

Total Return Average : +3.13%