Ross Healy, chairman of Strategic Analysis Corporation and portfolio manager at MacNicol & Associates Asset Management
FOCUS: North American large caps
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MARKET OUTLOOK

Nobel Prize winner and economist Robert Lucas pointed out that if people were rational, then their rationality would cause them to figure out predictable patterns from the past and adapt, so that past information would be more or less useless for predicting the future. What we are facing today is a pattern that we have seen over many, many market cycles, which would seem to point to an impending bear market. Valuations are high and many are extreme by historical measures. We have the usual sign of market excess in the speculation in imagined value — this time it's bitcoin. And we have the ultimate killer argument that the Fed will be there to prevent any meltdown from getting out of hand, which allows these excesses to transpire in the first place.

What we do not have as of yet is any signal that the end times for the stock market are imminent. In fact, if anything, the U.S. tax “reform” bill will potentially improve the upside potential for the market, and maybe by a fair degree. So we are left with the task of trying to keep our assets more or less safe from meltdown harm, while at the same time trying to make some money due to the rising tide of the market.

Because I know that current excessive valuations will eventually be corrected – they always are – I am personally content with holding a fair amount of cash in my portfolio, as well as providing a hedge against monetary stupidity (of which there is a lot), and then try to find some stocks that will benefit from most environments. It is a compromise strategy, that is true, and not ideal if all you want to do is make money, no matter the risks you are running, but I can sleep at night without undue anxiety.

TOP PICKS

BANK OF AMERICA (BAC.N)
Good earnings and a probable bump due to tax reform and higher interest rates.

THE STARS GROUP (TSGI.TO)
Excellent sales and earnings report recently.

KINROSS GOLD (K.TO)
With the Tasiast Mine coming on, you have to hold this gold.

PAST PICKS: JANUARY 19, 2017

BANK OF AMERICA (BAC.N)
I still like this stock – especially with tax “reform.”

• Then: $22.53
• Now: $29.23
• Return: 29.73%
• Total return: 31.77%

IMPERIAL OIL (IMO.TO)
I am nervous about oil prices.

• Then: $44.29
• Now: $39.63
• Return: -10.52%
• Total return: -9.06%

POWER FINANCIAL (PWF.TO)
What’s not to like here? Good dividend, and cheap.

• Then: $33.49
• Now: $35.29
• Return: 5.38%
• Total return: 9.27%

TOTAL RETURN AVERAGE: 10.66%