Jim Huang, President, T.I.P. Wealth Manager

FOCUS: North American equities

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MARKET OUTLOOK

After a long period of tranquility, volatility has returned to the financial market. The advent of further benchmark interest rate increase in the U.S. is bound to create uncertainties for investors who have gotten used to a long period of central bank benevolence. Coupled with the stagnant global economic growth and talk/adoption of negative interest rates outside the U.S., the outlook has been muddled and investor confidence shaken. However, there is no imminent threat of economic recession worldwide, and global liquidity remains abundant. The U.S. economy is bouncing back from seasonal weakness and the employment picture remains strong. Overall, the pullback in stocks cleansed some valuation excess in the market and created buying opportunities in many. Although volatilities are not likely to disappear in the near-term, the risk and reward for the rest of 2016 is favourable.

Top Picks

Transcontinental (TCLa.TO) - Last purchased in Aug. 2016 at $19.24

Transcontinental is well known as a proven efficient commercial printer as well as publisher for trade magazines. With the internet revolution obliterating all things paper, the traditional business has been in a slow decline for the last decade, thus the low valuation the stock is trading at. Transcontinental has continued to cut costs, consolidate operations and generate good free cash flows which are used to pay a generous dividend and expand into new areas of growth. With further expansion into the higher growth flexible packaging, Transcontinental has the potential of being rerated by the market while providing a sustainable yield.

Intertape Polymer Group (ITP.TO) – Last purchased in Aug. 2016 at $21.27

Intertape Polymer is a manufacturer of a variety of tapes and films for industrial and retail uses. It has spent the last few years lowering its costs, in part by opening new, large-scale plants to replace older plants. It also enjoyed the lower input costs from the shale natural gas production. With a strong balance sheet, Intertape has the opportunity to selectively expand its footprint by acquiring smaller rivals and enhance shareholder value.

Sleep Country Canada (ZZZ.TO) – Last purchased in Aug. 2016 at $31.40

Well known (if not loved) for its cheeky jingo, Sleep Country Canada is the No. 1 mattress retailer in Canada. With consumers’ increasing focus on health and wellness, good-quality mattresses serve a broadened market. In Canada, the decline of mid-tier department store retailers opens the door for incremental market shares for a strong operator. Sleep Country Canada has stepped up its powerful advertising campaign and expanded its offering to include higher margin accessories. Rejoining the public market just over a year ago, Sleep Country Canada is yet to be recognized by many investors as a dominant Canadian retailer.

Past Picks: July 28, 2015

DIRTT Environmental Solutions (DRT.TO)

• Then: $6.30
• Now: $5.11
• Return: -18.89%
• TR: -18.89%

George Weston (WN.TO)

We continue to believe that George Weston’s effort to revitalize its bakery operation will bear fruits. However, Loblaw is facing a challenging food-retailing environment, and the discount of George Weston to its underlying value has been narrowed, therefore we decided to exit the stock

• Then: $105.59
• Now: $109.59
• Return: +3.79%
• TR: +5.85%

Transcontinental (TCLa.TO)

• Then: $14.25
• Now: $18.23
• Return: +27.93%
• TR: +32.90%

Total Return Average: +6.62%

Website: tipvest.com