Mike Newton, Portfolio Manager & Director of Wealth Management at Scotia Wealth

Focus: North American Large Caps and ETFs

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MARKET OUTLOOK:

Despite continued focus on the Fed and uneasiness around Brexit, the broad markets are moving forward—defying at least for now expectations for “sell in May.”

The Fed’s oscillation between hawkish-dovish-hawkish tones since last December has been responsible for much of the volatility experienced over the past six months.

With the markets absorbing bad news relatively well, combined with very bearish investor sentiment, and with no visible overheating conditions, odds of a breakout are rising.

Top Picks:

Hormel Foods (HRL.US)

• Most recent purchase May 18th at $36 USD
• Hormel Foods, the maker of Spam, recently reported its profit climbed 20 per cent in the most recent quarter and raised its guidance for the year, but the markets didn’t like some of the margin decreases.
• Hormel had returned almost 500 per cent to investors over 10 years and then just corrected close to 25 per cent on the concerns of rising costs throughout 2016. The company has also boosted its dividend by over 300 per cent in the same time period.
• The specialty food maker owns more than 30 brands with #1 or #2 market share positions in their respective category. This correction presents an attractive entry point.

Currency Exchange Intl. (CXI-T)

• Most recent purchase April 28th at $25.05 CAD
• CXI provides a range of foreign currency exchange products and services in North America, including Hawaii.
• Related services include the licensing of proprietary FX software applications delivered on its web-based interface, www.ceifx.com, and licensing retail foreign currency operations to select companies.
• In a normal operating year there is seasonality in operations with higher revenues generated from March until September and lower revenues from October to February.
• This coincides with peak tourism seasons in North America when there are generally more travelers entering and leaving the United States and Canada.
• The next catalyst may come with an eventual Schedule 1 bank licence which they have been working on for over four years.

iShares Nasdaq Biotech ETF (IBB-US)

• Most recent purchase April 21st at $284 USD
• After correcting into last year, the biotech space is breaking out of its sideways trend. The three top holdings of IBB - Gilead, Biogen, and Celgene, have all posted strong growth in revenue and earnings.
• Gilead grew revenue by 101 per cent and earnings by 210 per cent over the past twelve months. Biogen increased revenue and earnings by 32.5 per cent and 71 per cent, respectively over past twelve months. And Celgene’s revenue and earnings are up 18.4 per cent and 81.4 per cent over the past twelve months.
• Unfortunately Biogen recently dropped 12 per cent on a disappointing drug study bringing the ETF down 2 per cent. From a seasonal perspective, the biotech sector tends to see positive inflows starting in June in anticipation of strong news flow at conferences towards the back half of the year. 

 
Past Picks: JUNE 4, 2015 

CN Rail (CNR.TO)

• Then: $73.90
• Now: $77.17
• Return: +4.42%
• TR: +6.79%

Comcast (CMCSA.O) 

• Then: $58.95
• Now: $63.22
• Return: +7.24%
• TR: +9.11%

JD.COM (JD.O)

• Then: $34.12
• Now: $21.24
• Return: -37.75%
• TR: -37.75%

Total Return Average: -7.28%

Twitter: @NewtonGroupSM

Website: www.newtongroupwealth.com