Robert McWhirter, president of Selective Asset Management

Focus: Canadian dividend and small-cap stocks

MARKET OUTLOOK

Our market outlook for the April 29 Market Call noted “From a technical analysis perspective North American equities appear to be over-bought. We are entering the classic sell in May and go away period. Will this be a significant pull back or more of a rotational affair?”

That question was quickly answered on May 5 when U.S. President Trump raised the tariffs to 25 per cent on US$250 billion of Chinese goods. Equity markets around the world moved lower on concerns of further escalation of the China-U.S. trade dispute.

Technical analyst reports are showing a seven per cent potential downside risk. However, they are also showing that U.S. stocks are trading at a 20 per cent discount relative to their 35-year average price to free cash flow (P/FCF) multiple.

TOP PICKS

Robert McWhirter's Top Picks

Robert McWhirter of Selective Asset Management shares his top picks: Exchange Income Corp, Gildan Activewear and Microbix Biosystems.

EXCHANGE INCOME CORP (EIF.TO)

It’s a diversified, acquisition-oriented corporation focused on opportunities in aerospace and aviation services, equipment and manufacturing. The $50.00 average target price of the 11 analysts that cover EIF implies 30 per cent potential upside.


GILDAN ACTIVEWEAR (GIL.TO)

Gildan makes t-shirts, fleece, sport shirts, underwear, socks, hosiery and shapewear. Technical analysts are highlighting indicators that the stock has a 30 per cent potential upside.


MICROBIX BIOSYSTEMS (MBX.TO)

The enterprise value manufactures over 30 viral and bacterial antigens and cell, culture-based biological products used for medical testing. Over the past two years MBX has spent $3 million for efficient bio reactors which will increase three times capacity and are expected to boost annual bottom line profitability by $1 million by the end of 2019. Combined with the $1.56 million of Q2 annualized net income gives a cheap 13.3 times price-to-earnings exit 2019 run rate ($2.56/$34 million fully diluted market cap).

In February I joined the CDC’s HPV webinar to hear Jason Mendelsohn’s story of his HPV oral cancer battle. MedX Health’s FDA approved light therapy speeds post chemo tissue healing for HPV oral cancer patients. Microbix could do ISO 13485 self-affirmation of controls for three HPV strains with the annual potential of one million HPV tests leading to potential additional recurring income of $0.8 million per year.($0.4 million in 2020).

It is my and my family’s third largest individual equity holding.

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
EIF Y N Y
GIL Y N N
MBX Y Y N

 

PAST PICKS: MAY18, 2018

Robert McWhirter's Past Picks

Robert McWhirter of Selective Asset Management reviews his past picks: Canadian Natural Resources, TFI International, Waste Connections, CNQ.TO, TFII.TO, WCN.TO

CANADIAN NATURAL RESOURCES  (CNQ.TO)

  • Then: $48.16
  • Now: $36.92
  • Return: -23%
  • Total return: -21%

TFI INTERNATIONAL  (TFII.TO)

  • Then: $38.15
  • Now: $44.45
  • Return: 17%
  • Total return: 19%

WASTE CONNECTIONS (WCN.TO)

  • Then: $96.46
  • Now: $127.92
  • Return: 33%
  • Total return: 34%

Total return average: 11%

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
CNQ N N N
TFII Y N Y
WCN Y  N Y

 

FUND PROFILE

Canadian Dividend Strategy

Performance as of: April 30, 2019

  • 1 month: 2.8% fund, 3.2% index

INDEX: TSX Composite.

Returns are based on reinvested dividends, net of fees and annualized.

 TOP 5 WEIGHTINGS AND HOLDINGS

  1. Aecon Group: 4.9%
  2. Waste Connections: 4.8%
  3. Badger Daylighting: 4.5%
  4. Rogers Communications: 4.4%
  5. First Service: 4.3%

WEBSITE: http://selectiveasset.com/