After a troubling start to the year, recent rallies have pulled North American markets into positive territory. The same cannot be said in much of the rest of the world. While this respite in North America, and particularly Canada, has given investors some relief, the outlook going forward is far from certain. Many geopolitical and economic factors have yet to play out and have the potential to bring both positive and negative market reactions. Just last week we were reminded that terrorism is still with us as the attack on Brussels illustrated. Unrest is not just confined to the Middle East. Europe is still contending with the mass influx of refugees as well as economic tensions threatening the very existence of the European Union. Tensions in Russia/Ukraine, China and its neighbours, Brazil and Venezuelan political instability continue to persist.

In Canada, we are fortunate to be situated so close to the United States as their economy appears to be stronger and growing. This benefit is evident in the improving export of goods and services from Canada to the U.S.

In this environment we would advise caution. In many cases, the rally in share prices has, from our view, caused us to stand back as we are confident that more opportunities will become available as the year progresses.

TOP PICKS:

Royal Bank (RY.TO) 

Last Purchased: January 28 2016 @ $67.75
The Royal Bank is Canada's largest financial institution with extensive domestic and wealth operations as well as global capital markets, custody and brokerage networks. In the last quarter, Royal completed its acquisition of City National Bank, which has contributed to higher earnings in wealth management. Royal’s diversified business model and strong capital base will support earnings and dividend increases going forward.

Precision Drilling (PD.TO)

Last Purchased: September 23 2015@ $5.00
Precision is the largest oilfield services company in Canada with operations domestically, in the US and internationally. The company has a marketing alliance with Schlumberger, whereby Precisions Tier 1 drilling rig offerings are paired with Schlumberger’s state of the art assembly and services. The high grading of the fleet over the past few years has left precision with the best fleet in Canada. The Company has a reasonably strong balance sheet that combined with the superior rig fleet and large geographic footprint, should sustain the company through the recent malaise in the industry. The stock is attractive at current levels.

Stuart Olsen (SOX.TO)

Last purchased: October 5 2015 @$5.49
Stuart Olson Inc, formerly The Churchill Corporation, is one of Canada's largest construction firms providing general contracting and electrical building systems contracting in the institutional and commercial construction markets as well as electrical, mechanical and specialty services in the industrial construction markets.  The stock has underperformed the market and its peers as investors have focused on its exposure to Western Canada. Going forward, there are plans by the governments of Alberta, Saskatchewan and BC, as well as the Federal government, to dramatically increase spending on infrastructure. At the end of the fourth quarter, SOX had a backlog of $1.96B (58% construction, 28% cost-plus, 5% design build and the rest in tenders). The Industrial Services Group while exposed to the oil sands, derives its revenue from maintenance, repair and operations in the energy, mining and hydro industries. Stuart Olsen has a good balance sheet. The dividend currently yields 7.2%.

Past Picks: Apr. 28, 2015

Manulife Financial (MFC.TO)

AGT Food and Ingredients (AGT.TO)

New Flyer Industries (NFI.TO)

Total Return Average : +58.60%