Full episode: Market Call Tonight for Monday, April 15, 2019
Michael Decter, CEO and chief investment officer of LDIC Inc.
Focus: Canadian large caps
Our outlook for the balance of 2019 is positive. The dramatic shift by central banks in Canada and the U.S. to maintain low interest rates is encouraging. Inflation is contained and headline unemployment is low. A brief inversion in the yield curve has been noted, but doesn’t present an immediate threat. We believe the rally in equity markets that began on Dec. 26 is sustainable in the near term.
Concerns related to the extended length of the current business cycle, near-term election results in Canada both at the federal level and in Alberta, rising corporate and household debt levels and potential geopolitical unrest remain in focus within our longer-term outlook.
Additionally, there remains uncertainty about three key trade agreements. First, and despite having limited direct impact on our investment universe in North America, Brexit has been on a controversial and uncertain trajectory. Repeated attempts by the British government and parliament to find common ground on future trade with the EU have failed. Next, a newly emboldened Democratic House of Representatives will likely find reason to amend the terms of the USMCA trade deal. Finally, China-U.S. trade negotiations haven’t been resolved yet. The outcome of each of these ongoing negotiations is unknown and may have negative implications for equity market performance.
We believe that both the Bank of Canada and the Federal Reserve will hold their interest rates steady for the balance of 2019. This will provide important stability to fixed income markets and rate-sensitive equities including REITs, telecommunications and utilities, which continue to perform very well.
CORUS ENTERTAINMENT (CJRb.TO)
Corus has a 25 per cent free cash flow yield. Last quarter saw first year-over-year growth in TV advertising in four years; expect this to continue.
It seems much of the negative press is behind Apple as the stock has broken through the $200 level for the first time since November. It’s moving further into a services company with the recent launch of credit card and into content creation through TV streaming.
BOYD GROUP INCOME FUND (BYD_u.TO)
Boyd’s stock is firing on all cylinders after it posted strong same-store sales growth in the fourth quarter. There’s an attractive market for M&A, with two larger competitors tied up with integration (Caliber and ABRA). It recently announced a $400-million expansion to their credit facility. We favour consolidator-type companies with a good track record and exposure to fragmented markets. Boyd checks all of these boxes.
PAST PICKS: OCT. 16, 2018
JPMORGAN CHASE (JPM.N)
- Then: $108.62
- Now: $109.94
- Return: 1%
- Total return: 3%
PARKLAND FUEL (PKI.TO)
- Then: $46.95
- Now: $40.25
- Return: -14%
- Total return: -13%
- Then: $85.76
- Now: $112.94
- Return: 32%
- Total return: 33%
Total return average: 8%
LDIC North American Small Business Fund
The fund invests in a diversified portfolio of small capitalization companies in North America, through debt and equity securities, with an objective to achieve long term capital appreciation.
Performance as of March 31, 2019
- 1 month: 0.67% fund, -1.40% index
- 1 year: 3.68% fund, -0.72% index
- 4 years: 10.9% fund, 3.03% index
Index: Benchmark is 70% S&P TSX Small Cap Index (CAD) and 30% Russell 2000 Index (USD) blend.
Returns are net of fees.
TOP 5 HOLDINGS AND WEIGHTINGS
- Kew Media Group Inc: 3.5%
- Akumin Inc: 3.3%
- Tucows Inc: 3.1%
- Points International Ltd: 3.1%
- Information Services Corp: 2.8%