Mike Newton, director of wealth management and portfolio manager at Scotia Wealth Management
Focus: North American large caps and ETFs 

MARKET OUTLOOK

With the Russell 2000 finally making its first 52-week high in over a year, it's triggering a strong historical buy signal. When it’s hit a new high after going at least one year without one, it’s ended up higher six months later 10 out of 11 times since 1978. Even a cursory glance at the market charts around the world shows that stocks are in a solid uptrend. And with the market sporting the best year-to-date returns in five years, investors are likely feeling pretty good heading into the holiday season.

There is only so much time left on the calendar for managers to improve their relative performance into year-end. I've seen enough "melt ups" in my day to recognize that Santa may have shown up early this year and might even stick around a while. My current plan is to stay fully invested into year-end.

It is a different story as we roll into 2020, as many investors including myself have some apprehension over the steepness of this rally. In addition, market sentiment is quickly reaching extreme levels to the upside. I am not calling for anything dire, but as always we have a risk management process in place to evaluate market trends and hopefully warn us of any shift in sentiment before any larger damage is done.

TOP PICKS

ALIBABA (BABA:UN)

Recent purchased at $151.47 on May 29, 2019.

Shares in Alibaba are sitting at the exact same price they were two years ago today. China’s economic slowdown, the trade dispute with the U.S., and Hong Kong protests have dominated the news this year. Those concerns present a great buying opportunity. 

As digital savvy millennials enter the workforce and the middle-income population continues to grow the shift of retail sales toward the e-commerce channel is expected to accelerate. Hong-Kong listed shares of Alibaba Group rose nearly 7 per cent in their first day of trading Tuesday. Alibaba priced 500 million shares in a secondary offering at HK$176 (US$22.48) last week, raising HK$88 billion (US$11.2 billion). It's the richest initial public offering of the year, at least until Saudi Aramco goes public in Saudi Arabia. 

MERCADOLIBRE (MELI:UW) 
Recently purchased at $561.58 on Sep. 11, 2019.

MercadoLibre has fallen nearly 17% from recent highs, most likely as part of Argentina's macroeconomic issues. But the company recently posted a mostly upbeat quarterly earnings report, suggesting the drop isn't necessarily grounded in fundamentals. MercadoPago, the company's payment processing platform, and geographic diversity should help shield the company from investor fears

The numerous growth initiatives the company is undertaking, and the potential for the geographies it serves, appear to be under-appreciated as macroeconomic fear overshadows such promise. As a result, the stock might be a great value play on its recent pullback.

GROCERY OUTLET HOLDING (GO:UW)
Recently purchased at $33.90 on July 16, 2019.

Grocery Outlet  owns and operates a chain of grocery stores in the U.S. Although it’s newly public, the company was founded in 1946 as a seller of government surplus food. Today, there are 330 stores on the West Coast and in Pennsylvania and it’s still led by third-generation members of the founding Read family. The main driver of its growth is the merchandising. Packaged-goods companies have constant inventory imbalances, retailers cancel orders and sometimes new items don’t sell well. As a result, Grocery Outlet acts as a clearing channel where packaged goods companies can recover a fair value on their goods and in turn Grocery Outlet can pass along discounts to their customers.

Last quarter, sales at longstanding stores rose 5.8 per cent, faster than the 2.7 per cent growth recorded a year ago. Same-store sales have climbed for 15 consecutive years. The store base has expanded 10 per cent annually since 2015 and I believe it can grow 10-fold over the long term. 

PAST PICKS: NOV. 20, 2018

CME GROUP (CME:UW)

• Then: $192.16
• Now: $205.87
• Return: 7%
• Total return: 10%

ECOLAB (ECL:UN)

• Then: $156.06
• Now: $186.23
• Return: 19%
• Total return: 21%

VISA (V:UN)

• Then: $133.37
• Now: $182.55
• Return: 37%
• Total return: 38%

Total return average: 23%