Ross Healy, chairman of strategic analysis corporation and senior portfolio manager at MacNicol & Associates Asset Management
FOCUS: Canadian value stocks
MARKET OUTLOOK:
Most economists assume that things are settling back down into some sort of dull roar, with inflation easing and interest rates retreating. But rising prices are not the cause of inflation these days, they are a symptom of it, and generally rising inflation and interest rates are going to be with us for some time.
In the stock market, the AI-fuelled bull run continues, although I note some cracks are starting to appear as valuations are getting very rich. The Nasdaq 100 is less than two per cent away from the peak valuation that it reached just before the 2022 bear market. We have similar levels of euphoria as we did during that time with analysts almost tripping over themselves to raise price targets for some of the biggest names. This sentiment isn’t without merit as, so far, it looks like the U.S. Federal Reserve has engineered a soft landing, something we have been forecasting for some time. Our own analysis suggests that the U.S. is not looking for a recession in the near future, that is, a material slowdown in employment and a decline in real personal income. That said, however, we are entering a period that is traditionally seasonally weak, especially during an election season that is sure to be full of surprises.
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TOP PICKS:
With a weak currency likely, and inflation not vanishing but persistent, precious metals should be a cornerstone of all portfolios. I like AGI for its strong fundamentals, growing high-quality reserves, and excellent management.
Peyto Exploration and Development (PEY TSX)
I like the energy sector in a generally inflationary environment. ESG sentiment has been hostile to the group and they are therefore cheap. Peyto has been trading sideways for two years now and I think the stock is poised to resume its uptrend after stalling here in the mid-to-low teens. The stock has a very healthy but still decently covered dividend yield and a sound balance sheet that will pay investors to wait for this coming move.
BNN Bloomberg is owned by Bell Media, which is a division of BCE.
Sometimes as a value investor, you buy what you know to be a good company that is trading at a cheap price. This stock is now cheaper than it has been in over 10 years and a revaluation of the stock price is in order. The decline from $74 to around $40 in the last two years carried the stock to an important support level which could be a near-term bottom for the stock and could even produce a surprising rebound. BCE holds the coveted title of being a dividend aristocrat, one of the few stocks in Canada to hold that title, and just recently raised its dividend again. If you have ever wanted to get into BCE, now may well be the time.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| AGI TSX | Y | Y | Y |
| PEY TSX | Y | Y | Y |
| BCE TSX | N | N | N |
PAST PICKS: June 8, 2023
Laurentian Bank (LB TSX)
- Then: $33.02
- Now: $26.25
- Return:-20%
- Total Return: -14%
Suncor (SU TSX)
- Then: $40.42
- Now: $51.68
- Return:28%
- Total Return: 34%
Hudbay Minerals (HBM TSX)
- Then: $6.30
- Now: $12.99
- Return:106%
- Total Return: 107%
Total Return Average: 42.3%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| LB TSX | Y | Y | Y |
| SU TSX | N | Y | Y |
| HBM TSX | N | Y | Y |