John Stephenson, president and CEO of Stephenson & Company Capital Management

Focus: North American large caps and resource stocks
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MARKET OUTLOOK
While we may be witnessing a stabilization of global economic growth, there is a dearth of evidence pointing to a meaningful acceleration. Given the weak economic growth globally, a broadening out of cyclical sector leadership is unlikely, suggesting that defensive sectors will once again return to a leadership role.

CATALYSTS TO WATCH

1. U.S. election: Can Trump defy the odds? Markets currently are pricing a Clinton win — a resurgent Trump campaign could send the markets swooning.
2. Earnings season: A lot of skepticism surrounding this earnings season — can it surprise to the upside?
3. Fed open market committee policy meetings: Will they really go in December or will they still be on hold?
4. U.S. dollar: Can the strengthening trend continue?
5. Oil: With a breakout of over $50/bbl, can the trend continue?

TOP PICKS

PEMBINA PIPELINE CORP (PPL.TO) – Last bought on Sept. 28 at $ 39.89

• Strong fee-for-service business with cash flows from primarily liquids infrastructure, supports premium valuation.
• Solid yield of 4.6 per cent.
• Company has raised its dividend annually in the five per cent range. 
• Strong pipeline of growth projects.

SHORT: SHAKE SHACK (SHAK.N) – Last shorted on Oct. 19 at $32.84

• Valuation is very stretched at 70x P/E.
• A widening gap between the cost of eating out versus eating at home.
• Weak consumer.

SHORT: GUESS? INC. (GES.N) – Last shorted on Oct. 19 at $13.91

• The brand has lost its strength as it becomes less relevant to younger generations.
• Guess' traditional strength lies in its denim offering, but competition in the jeans space has become fierce.
• Over the past three years, operating profit fell approximately 24 per cent annually on six per cent average revenue declines.
   

PAST PICKS: NOVEMBER 16, 2015

BANK OF AMERICA (BAC.N)
Sold on March 24 at $13.35. We still like the stock fundamentally. However, defensives have been driving the bus this year.

• Then: $17.43
• Now: $16.47
• Return: -5.51%
• TR: -4.12%

METLIFE (MET.N)
Sold on May 11 at $42.78. We still like the stock fundamentally. However, defensives have been driving the bus this year.

• Then: $50.47
• Now: $46.85
• Return: -7.17%
• TR: -4.51%

WALT DISNEY (DIS.N)
Sold on December 23, 2015 at $105.86. Disney is a best-of-breed media company. However, it is priced accordingly and we had limited upside from our position, so we exited the position.

• Then: $115.92
• Now: $91.93
• Return: -20.69%
• TR: -19.61%

TOTAL RETURN AVERAGE: -9.41%
 

TWITTER: @Stephenson_Co, @StephensonFiles
WEBSITE: www.stephenson-co.com