The U.S. economy continues to be a source of growth, in a sluggish world economy. Euro Area GDP was up 1.6 per cent year over year in April.  Energy price declines have resulted in lower CPI readings in Europe and the U.S. CPI in April for the Euro Area declined -0.2 per cent.

Although the U.S economy continues to grow it is also sending mixed signals. The ISM index in April dropped to 50.8 from 51.8.  Although the new orders index fell back to 55.8 from 58.3, 55.8 it is still considered healthy. Consumer sentiment was revised lower to 89 in April.   Offsetting these data points, U.S. personal income was up 4.2 per cent in March, wages and salaries rebounded in March and increased 0.35 per cent month over month.

Overall, we believe that the U.S. economy is growing at a rate that only needs one rate increase.   In Canada we have slow growth in the resource heavy provinces and modest growth in Ontario, Quebec and B.C. GDP in Canada for February was -0.1 per cent and manufacturing was -0.8 per cent. We anticipated GDP to strengthen in Canada.

As we head to the summer the Market will be focused on the probality of Brexit and the early leaders in the U.S. presidential race.  Also the slowdown will weigh on investor’s minds.  We are prepared for volatility and will use the opportunity presented by the market to buy quality companies at a discount.

Interest rates in Canada will remain stable and the Federal Reserve in the U.S may raise rates by 25 basis points before the end of the year.

TOP PICKS:

K-Bro Linen (KBL.TO)     

K Bro is the dominant laundry and linen provider in Canada. Seventy per cent of revenues comes from the healthcare sector, and 30 per cent of revenues come from the Hotel sector.  Return on Equity of 14.7 per cent and less than 0.1x Debt to EBitda

K-Bro is down 21 per cent since the end of February after losing the opportunity to acquire Booth Centennial dominant provider to Toronto’s downtown hospitals.

Currently trades at approximately 8 times EV/EBitda payout ratio is about 50 per cent.

Transcontinental (TCL'A.TO)  

Transcontinental is the largest printer in Canada and the third largest printer in North America. Leading provider of local media and educational publications in Canada. Printer of Retail Flyers in Canada. They went from 54 to 22 printing plants. They have been diversifying into packaging which now makes up 10% of revenues and they want to grow to 25%.  Return on Capital of 21%, 5 year dividend growth rate of 11.6%  Good Balance Sheet D/CF of about 1 times.

Cinemark (CNK.N)    

Cinemark has 513 theatres and 5,796 movie screens in U.S and Latin America

Located in 14 Latin American countries  Trades at about 9 times P/CF and ROE of 20%, EBITDA margins of 23%Should get a benefit as the US dollar weakens.  18 MONTH Target of $41.00.

Past Picks: June 29, 2015

Discovery Communications (DISCA.O)                 

sold Discovery Communications at 28.31

Cargo Jet (CJT.TO)

Magna International (MG.TO)      

Total Return Average : -12.58%