Michael Sprung, president of Sprung Investment Management
Focus: Canadian large caps

MARKET OUTLOOK

Trade issues continue to cloud the economic outlook as tariffs constrain spending and companies seek alternative supply routes in an attempt to minimize the higher costs resulting from their implementation. Geopolitical issues are contributing to the growing uncertainty as we face federal elections in Canada and the U.S., turmoil in the U.K. with respect to Brexit and increasing tensions the Asia (Hong Kong) and the Middle East.

As the global outlook for economic growth diminishes, investors are reacting to the slightest pronouncements by central bankers as evidenced by the increasing volatility in the markets.

We suggest that investors continue to take a very cautious stance, investing in strong companies with solid balance sheets and management.

TOP PICKS

CIBC (CM:CT)
Last purchased in August 2019 at $99.92.

CIBC is Canada's fifth largest bank by market capitalization. Over the better part of the past decade, management has concentrated on de-risking and shoring up the balance sheet largely by retrenching and focusing on core competencies. The bank is consistently among the most profitable as measured by return on equity and with a strong capital base. Today the valuation is attractive and the yield is 5.6 per cent.

SUNCOR ENERGY (SU:CT)
Last purchased in August 2019 at $37.26.

Suncor is Canada's largest integrated energy company. The company has an extremely strong upstream asset base and the top downstream business in North America. Suncor is the most profitable Canadian refiner. The company generates very strong free cash flow, higher than its Canadian and global peers. Ongoing stock repurchases and dividends will return capital to shareholders. At current levels, the stock yields 4.3 per cent.

BCE (BCE:CT)
Last purchased in February 2018 at $56.22.

BCE is Canada's largest communications company. The company's dominant infrastructure build provides some competitive advantage over its primary competitors. However, changes in technology and the competitive landscape will require large ongoing capital outlays. In the wireline business, BCE is leading in its quest to bring fibre to the home that will provide superior internet and related services. The wireless business remains competitive and promotions are expected to continue, but BCE retains the largest market share. The media business remains challenging. In the current environment, we anticipate that BCE will more than hold its own position in the competitive landscape. The current yield of 5 per cent is attractive given the likelihood of future dividend increases.

PAST PICKS: AUG. 22, 2018

SCOTIABANK (BNS:CT)

• Then: $77.93
• Now: $72.44
• Return: -7%
• Total return: -3%

CANADIAN NATURAL RESOURCES (CNQ:CT)

• Then: $45.80
• Now: $32.25
• Return: -30%
• ​Total return: -27%

GEORGE WESTON (WN:CT)

• Then: $102.93
• Now: $110.92
• Return: 8%
• Total return: 10%

Total return average: -7%