Rob Lauzon's Top Picks: February 8, 2017

Rob Lauzon, deputy chief investment officer at Middlefield Capital Corporation

Focus: Global dividend stocks
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MARKET OUTLOOK
The market continues to touch new highs with the main driver being earnings growth. The earnings recession ended in Q3 2016, coupled with strong economic fundamentals, such as strong employment, and encouraging numbers from Europe and Asia, which have strengthened equities. In addition, the market continues to digest the probability and timing of Trump’s policies, specifically tax reform, decreased regulation, changes to the Affordable Care Act, infrastructure spending and trade renegotiations. Current equity market multiples are within the normal long-term range and are not expensive when compared to bond yields. Oil prices should continue to trade with a $50 floor given OPEC’s recent decision to take barrels off the market.

TOP PICKS

BRISTOL-MYERS SQUIBB (BMY.N)
This pharmaceutical stock represents an opportunity for value investors given its recent weakness. The current forward earnings multiple at 16x is below both the market and its recent historical multiple while it’s still expected to grow at over 15 per cent into 2020. We believe its immuno-oncology franchise is well positioned, and shares pay a three-per-cent dividend while patient investors wait for momentum to return into the stock.

FREEHOLD ROYALTIES (FRU.TO)
Freehold’s royalty model offers investors many attributes such as significant royalty production, minimal debt, cash flow to increase the dividend and third-party sustaining capex. Valuation is also attractive as it trades at half the multiple of its larger peer. Get paid a 3.8-per-cent yield while you wait for better energy prices.

BROOKFIELD PROPERTY PARTNERS (BPY_u.TO)
Currently, shares represent great value trading at 25-per-cent discount to NAV. Offers investors a well-managed, diversified real estate portfolio in one holding. We believe there is 10-per-cent upside in the stock as this valuation gap narrows in 2017. In addition, the company is a dividend grower — they recently increased their dividend rate five per cent, providing investors an annualized yield of 5.1 per cent.
 

PAST PICKS: MARCH 21, 2016

GROUPE EUROTUNNEL (GETP.PA) – Sold the stock due to increased risk of lower volumes due to Brexit, European elections, immigration uncertainty

• Then: $10.00
• Now: $8.98
• Return: -10.19%
• TR: -8.49%

CRESCENT POINT ENERGY (CPG.TO) – We have trimmed the stock

• Then: $18.59
• Now: $14.39
• Return: -22.59%
• TR: -21.19%

TOURMALINE OIL (TOU.TO)

• Then: $28.92
• Now: $29.77
• Return: +2.93%
• TR: +2.93%

TOTAL RETURN AVERAGE: -8.91%