Peter Imhof, vice president and portfolio manager at AGF Investments
Focus: North American Small Caps
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MARKET OUTLOOK

The Canadian Market has had a stellar 2016 relative to all other markets around the world. I am still quite bullish for the Canadian Market in 2017 as we should see strength continue in the oil and gas sector as earnings should be revised up. I would expect some pullbacks but we should be higher by the end of 2017. Results for the first two quarters of 2017 in the oil and gas sector should look favorable relative to last year’s results as the oil price is much higher vs last year. Historically the Canadian Market has dramatically outperformed the U.S. market when oil prices move up 10 per cent or more. Small Caps in Canada should outperform the larger caps in 2017 as 2016 was the first time in 5 years that small caps have outperformed in Canada. Typically the outperformance lasts a few years or is concentrated in a couple of years with vast out performance. Investors like to see what has done well before allocating more money to that sector and as clients start to see the performance numbers in the small cap area I believe more money will come into the space. 

TOP PICKS

YANGARRA RESOURCES (YGR.TO)
Recently purchased more at $1.80 last week
Oil and gas producer in West Central Alberta. Conservative management team that has built a nice little company that should show exceptional growth in 2017. During most of the 2016 the company decided not to drill as oil prices were low. They focused on acquiring lands and working on their drilling techniques. Yangarra recently started drilling and have had some good results with their first well producing more than 500 BOE. Reminder that Yangarra only produces 2900 BOE so the incremental amount is a large percentage of their overall production.  They have drilled three other wells and we are waiting to hear how they have been producing. Yangarra’s cash flow and production should move up dramatically in 2017 and will get on the radar screen of more fund managers.

TAHOE RESOURCES (THO.TO)
Recently purchased more this week at $11.80
Precious Metals producer with their main asset being the Escobal silver mine in Guatemala. Tahoe has a history of being one of the lowest cost producers in the industry. The entire sector has been creamed over the past few months as the Fed raised rates and the market has priced in 3 hikes in 2017. I think the Tahoe has been overly beaten down and that the risk reward is very enticing at these levels. The company has a pristine balance sheet and still makes money at current silver and gold prices (one of few).

MILESTONE APARTMENT REIT (MST_u.TO)
Purchased more in November at $18.00
Owns and operates multi-family garden style properties in the Sunbelt states. The company has done a great job growing their cash flow and increasing their margins through rent increases and the overall demand for their products in Texas and Florida. They recently announced a 10 per cent increase in distribution. The stock trades at 4.5 per cent yield and pays a U.S. distribution which is a nice hedge against a falling Canadian dollar. The Reits have all been hit recently with the Fed tighting and I believe this makes for a good entry point.

PAST PICKS:  MAY 12, 2016

PAREX RESOURCES (PXT.TO)

• Then: $13.44
• Now: $17.21
• Return: +28.05%
• TR: +28.05%

FIRAN TECHNOLOGY GROUP (FTG.TO)

• Then: $2.40
• Now: $3.58
• Return: +49.16%
• TR: +49.16%

ESPIAL GROUP (ESP.TO)

• Then: $2.07
• Now: $2.10
• Return: +1.44%
• TR: +1.44%

TOTAL RETURN AVERAGE: +26.21%
 

WEBSITE: www.agf.com