Kash Pashootan, CEO and chief investment officer at First Avenue Investment Counsel
Focus: North American dividend stocks and portfolio construction

MARKET OUTLOOK:

Market boost from Fed’s dovish tone unlikely to last:

  • The Fed has changed its language from “long way to normal” to "close to normal.” The 10-year Treasury yield is now 3 per cent from 3.2 per cent.
  • The Fed will likely hike in December and then be more patient.
  • Why is the Fed turning dovish? Expect growth to slow in 2019.

Use any Santa Claus rally reposition your portfolio for 2019:

  • Expect Q4 trends to continue through Q1/19.
  • Tech and mometum down 9 per cent and industrials down 8 per cent.
  • Utilities up 4 per cent, staples up 3.5 per cent and real estate remains in place.
  • Defense will be key in the first half of 2019.

Oil can stay below $50:

  • Recall oil was at around $50 for the majority of 2015, 2016 and half of 2017.
  • Recall global growth jumped from 2.5 per cent in 2016 to 3.1 per cent in 2017.
  • Global growth is now slowing into 2019 and supply is at all-time highs.
  • Our dividend growth fund is 4 per cent energy versus 18 per cent TSX.

TOP PICKS

CMS ENERGY (CMS.N) 
3 per cent yield | 21 times forward price to earnings (P/E) | last purchased: November 2018.

  • Fully regulated utility with transparent cash flows.
  • Slew of 2019 Michigan rate cases should help boost revenues.
  • 10 per cent 5-year dividend growth rate.

GILEAD SCIENCES (GILD.O)
3.3 per cent yield | 10 times forward P/E | last purchased: November 2018.

  • Hepatitis C business struggles are priced in.
  • Strong balance sheet with over $30 billion cash for accretive acquisitions next year.

TELUS (T.TO)
4.6 per cent yield | 16 times forward P/E | last purchased: October 2018.

  • Most pure-play Canadian wireless company.
  • Investments in 4G/5G networks should increase data speeds and help boost average revenue per user.
  • Capital expenditures to slow, which supports a higher free cash flow and a 7 to 10 per cent dividend growth target.

 

DISCLOSURE FAMILY PERSONAL PORTFOLIO/FUND
CMS Y Y Y
GILD Y Y Y
T Y Y Y

 

PAST PICKS

NFI GROUP (NFI.TO)

  • Then: $52.93
  • Now: $37.44
  • Return: -29%
  • Total return: -27%

CITY HOLDING COMPANY (CHCO.O)

  • Then: $68.84
  • Now: $76.25
  • Return:11%
  • Total return:14%

COLUMBIA BANKING SYSTEM (COLB.O)

  • Then: $45.56
  • Now: $39.74
  • Return: -13%
  • Total Return: -10%

Total return average: -8%

 

DISCLOSURE FAMILY PERSONAL PORTFOLIO/FUND
NFI Y Y Y
CHCO Y Y Y
COLB Y Y Y

 

TWITTER: @kashpashootan
WEBSITE:  www.firstavenuecounsel.com