Robert McWhirter, president of Selective Asset Management
Focus: Canadian dividend and small-cap stocks

MARKET OUTLOOK

Unfortunately, the impact of COVID-19 has made the economic outlook very uncertain. We now appear to be in a recessionary bear market of unknown duration. To offset the expected economic slowdown,the U.S. Federal Reserve has cut interest rates and will buy $700 billion of bonds and mortgage-backed securities to provide liquidity.

We believe that due to the current low interest rates and uncertain economic growth outlook, predictable income equities may receive a significant premium over unpredictable growth equities. If we were to enter a “recession” phase, we won’t see a steep decline, as the dramatic decline in interest rates, and oil prices should provide support to the U.S. consumer (at the expense of lenders) and may limit or prevent a U.S. consumer recession.

TOP PICKS

WASTE CONNECTIONS (WCN TSX)

Waste Connections is an integrated solid waste services company that provides non-hazardous waste collection, transfer, disposal and recycling services in North America. The consensus $144.88 target price from eight analysts implies 19 per cent potential upside.

ENGHOUSE SYSTEMS (ENGH TSX)

Enghouse Systems provides customer interaction software and services to manage customer communications across the enterprise. It also provides a range of products to telecom service providers, utilities, and the oil and gas industry. The consensus $58 target price from five analysts implies 35 per cent potential upside.

CEMATRIX (CVX TSXV)

Cematrix is a manufacturer and supplier of cellular concrete products with applications in road construction, bridge abutment and tunnel grouting. The company’s strategic partnership with Lafarge provides significant material cost savings and business leads.

Cematrix’s strong backlog, large bid pipeline, rising sales and what appears to be a compelling valuation looks an awful lot like Xebec 15 months ago when I recommended it as one of my Top Picks at 84 cents (it’s now 2.5 times higher). My one-year target for Cematrix is 75 cents, over double the current price.

PAST PICKS: MARCH 18, 2019

CANADIAN NATURAL RESOURCES (CNQ TSX)

• Then: $37.39
• Now: $16.43
• Return: -56%
• Total return: -54%

TFI INTERNATIONAL (TFII TSX)

• Then: $40.82
• Now: $32.06
• Return: -21%
• Total return: -20%

WASTE CONNECTIONS (WCN TSX)

• Then: $113.22
• Now: $112.02
• Return: -1%
• Total return: -1%

Total return average: -25%

WEBSITE: selectiveasset.com