Rob Lauzon, deputy chief investment officer at Middlefield Capital Corporation 
Focus: North American equities
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MARKET OUTLOOK

The cyclical and reflation-oriented themes we observed throughout the end of 2017 continue in force through the first weeks of this year. There is no reason to expect that a dramatic reversal in fundamentals is imminent, however investors need perspective and discipline for 2018. Earnings growth should match and potentially beat current expectations providing a layer of support for the stock market. Pro-cyclical sectors should be owned including financials, industrials, technology and energy. We should expect periods of elevated volatility — and pullbacks should be bought — as the market digests higher interest rates, mid-term elections in the U.S., and extreme sentiment and overbought conditions throughout the year.

TOP PICKS

PFIZER (PFE.N)
We feel shares will re-rate higher during 2018 based on management’s goal to focus on improving the quality of its ‘pipeline’ both organically and through potential M&A. Pfizer trades at a steep discount to its peers and market while paying a healthy dividend. New tax legislation will enable the company to return capital to shareholders through increased buybacks and dividend growth. Last purchased January 9, 2018 at US$36.50.

BNP PARIBAS (BNP.EPA)
Trades in Paris. We’re positively disposed to European banks as peak regulatory burden sentiment is in the rearview mirror. GDP and loan growth (both business and consumer) are accelerating. Interest rates should eventually start to rise across the continent. Specifically we like the outlook for France as Macron’s pro-business economic reforms express themselves. We feel BNP will rate higher during 2018 and close its valuation gap. Last purchased in early December 2017 at 63.55 euros.

FREEHOLD ROYALTIES (FRU.TO)
Similar to last year we expect Freehold to be one of the select few companies in the Canadian energy sector to increase its dividend in 2018. The company’s ability to do so can be attributed to the robust cash flow being generated by the royalty business amongst higher energy prices, combined with negligible debt. Last purchased in July 2017 at $13.30. 

PAST PICKS: NOVEMBER 1, 2016

BRISTOL-MYERS SQUIBB (BMY.N)

• Then: $50.80
• Now: $61.91
• Return: 21.87%
• Total return: 26.00%

RIOCAN REIT (REIu.TO)

• Then: $25.87
• Now: $24.10
• Return: -6.84%
• Total return : -0.55%

BANK OF AMERICA (BAC.N)

• Then: $16.61
• Now: $30.51
• Return: 83.68%
• Total return: 87.22%

TOTAL RETURN AVERAGE: 37.55%