MARKET OUTLOOK:

Expectations of an economic recovery continue to increase as greater numbers of people are vaccinated and hopes of a post-pandemic recovery take hold. The financial markets have largely reflected these expectations, stretching valuation levels to lofty heights. 

Inflationary expectations have also started to build as prices have been pushed up as supply disruptions have resulted from both pandemic conditions and geopolitical concerns. Furthermore, massive debts have built up during the pandemic in both the public and private sectors. The employment picture remains murky as job opportunities appear plentiful but the uptake in terms of willingness and/or skills needed are taking time to settle out.

We believe that this is a time to be cautious in stock selection. Companies with strong fundamentals and strong management should be favoured over those where values depend on future prospects for growth and profitability.
 

TOP PICKS:

Alaris Equity Partners Income Trust (AD-U TSX)
Last bought $16.00 on Feb. 10/21

Alaris continues to exhibit improving business conditions for its partners. The opportunities for capital deployment remains robust and redemptions over the next couple of quarters will enable further investments through the remainder of this fiscal year into 2022. 

Going forward, it is anticipated that the payout ratio will be maintained at or below 70 per cent. At current levels the yield is around 6.4 per cent. We expect that distributions will increase in line with increasing cash flows. 

Alimentation Couche-Tard (ATD/B TSX)
Last bought $49.69 on Sept. 15/21

Alimentation Couche-Tard is one of the largest convenience store operators and fuel retailers globally with operations in North America, Ireland, Scandinavia, Poland, the Baltics and Russia comprising more than 14,200 owned and affiliated stores. 

Management has exhibited a disciplined approach to acquisitions that we expect will be exercised if the recent rumblings with respect to EG Group are well founded. In any event, improving economies post-COVID will support organic growth that will lead to enhanced profitability and shareholder returns.

Ag Growth International (AFN TSX) 
Last bought $29.08 on Sept. 14/21

Ag Growth plans, engineers and manufactures full solutions and systems across five platforms: Seed, Fertilizer, Grain, Feed and Food. The solutions facilitate the storage, movement, processing and protection of agricultural inputs/crops and food products. 

While Ag Growth has had its challenges over the past year with drought conditions in the western U.S. and diminishing crop yields in parts of Canada as well as some margin pressure due to rising input costs, order intake has been strong and backlogs are healthy. 

The company's growth by acquisition has resulted in higher leverage that is anticipated to diminish with expanding free cash flow as margins improve through cost measures and expanding demand for technological advancements in agriculture. The stock has been under pressure in the recent environment but we believe that it will recover as the pandemic subsides and agricultural technology demand builds.

Bank of Nova Scotia (BNS TSX) 

• Then: $67.50
• Now: $76.72
• Return: 14%
• Total Return: 18%

Suncor (SU TSX) 

• Then: $22.95
• Now: $24.20
• Return: 5%
• Total Return: 8%

Enbridge (ENB TSX) 

• Then: $42.64
• Now: $50.01
• Return: 17%
• Total Return: 23%

Total Return Average: 16%