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

MARKET OUTLOOK

There are multiple reasons to stay cautious, but valuations have improved dramatically following the recent downturn. The Street is expecting S&P 500 earnings per share to come in at $177 to $179 for 2019. At or below 2,700 the S&P trades at a compelling valuation of around 15.5 times. There are other reasons to stay optimistic: U.S. economic growth remains relatively healthy, sentiment towards stocks is extremely negative and the Fed may loosen policy as a result of a slowing economy and or weaker markets.

We remain bullish, but acknowledge that there are risks to our outlook. We’re seeing a lack of leadership in stocks (the generals have fallen). Moreover, risks abound in trade (China) and in politics (Italy, Brexit).

TOP PICKS

ENBRIDGE (ENB.TO)
Purchased on October. Average price around $41.35. 

Recent company developments have been favourable. As a result, we’re the most positive we’ve been on Enbridge in a long time.

The company is simplifying the organizational structure, which the market should reward with a higher multiple. In addition, Enbridge is deleveraging (debt-to-EBITDA is now less than 5 times) and has a full project pipeline that it will finance mostly with funds from operations. We continue to expect growing dividends into the foreseeable future.

MICROSOFT (MSFT.O)  
Purchased this month at around $106.

This is a great stock. We like it even more after the recent selloff. Microsoft has solid legacy businesses in Windows and Office and exciting growth opportunities in the cloud. Lastly – and perhaps most importantly – the company is not under the spotlight like other tech names are in regards to privacy issues.

BRISTOL-MYERS SQUIBB (BMY.N)
Purchased June at around $54. 

Bristol-Myers has been a laggard in the pharma space this year. We think it has one of the best pipelines of innovative drugs coming to market over the next few years. The stock should perform better as results from their immuno-oncology drug trials disseminated throughout 2019.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
ENB N N Y
MSFT N N Y
BMY N N Y

 

PAST PICKS: JAN. 10, 2018

PFIZER (PFE.N)

  • Then: $36.47
  • Now: $43.10
  • Return: 18%
  • Total return: 22%

BNP PARIBAS (BNPP.PA)

  • Then: Є66.43
  • Now: €44.32
  • Return: -33%
  • Total return: -30%

FREEHOLD ROYALTIES (FRU.TO)

  • Then: $14.00
  • Now: $9.23
  • Return: -34%
  • Total return: -31%

Total return average: -13%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
PFE N N Y
BNP N N Y
FRU N N Y

 

FUND PROFILE

Global Dividend Growers Income Fund (GDG_u.TO)
Performance as of Oct. 31, 2018

  • 1 month: -5.5% fund, -6.8% index
  • 1 year: 4.3% fund, 2.1% index
  • 3 years: 6.3% fund, 8.1% index

INDEX: MSCI World Total Return Index.
Returns are net of fees and reinvested dividends.

TOP 5 HOLDINGS

  1. Vonovia SE
  2. Microsoft
  3. Unitedhealth
  4. Merlin Properties
  5. Prudential Financial

WEBSITE: www.middlefield.com