Ross Healy, chairman at Strategic Analysis Corporation and portfolio manager with MacNicol & Associates Asset Management
Focus: North American large caps

_______________________________________________________________

MARKET OUTLOOK

It’s often said that we have a market of stocks and not a stock market. Today, this is particularly true.

Looking at the market as a stock market, too much of it is expensive and some of it is very risky. With the press of cash looking for a home – looking for some return – being so intense, it’s led to a potential overvaluation condition that could eventually spill into a very bearish market environment. My concern is that the current refusal of very expensive stocks to correct can create a feeling of complacency that stocks can’t correct. We’ve been there before and the overall end result can be dismal.

If we assume that this is a market of stocks however, it’s reasonable to hope that there are pockets of relative safety offering both longer-term rewards and reasonable shorter-term safety. But to consider such stocks, investors may be forced to buy into areas which may’ve been doing relatively poorly up until now and which aren’t highly recommended generally. This isn’t necessarily a comfortable strategy to pursue. Part of our job as an advisor to DIY investors is isolate such investments, cross our fingers and trust that good value will (almost inevitably) come out. From my perspective, areas in the Canadian market that fill that bill today are the utilities and the banks, with gold stocks as a hedge against central bank insanity.

Canada is by far the cheaper when compared to the U.S. We would perhaps maintain a higher weight here than normal. Yet this assumes that the TSX can systematically outperform the U.S., which may not necessarily be the case, notably if the U.S. decides not to back off or indeed escalates its current trade war stance.

TOP PICKS

ATCO (ACOx.TO)

Atco is a Canada-based company that offers a solid menu of energy infrastructure solutions to customers largely in Canada and Australia. There’s been very steady balance sheet growth for decades, but the share price itself has been very cyclical. This stock tends to bottom as the market peaks.

BANK OF NOVA SCOTIA (BNS.TO)

Scotiabank has enjoyed very steady balance sheet growth for decades. It provides a steadily growing yield and has good upside potential. It’s selling, if not at the bottom of its long-term range, at a reasonable price-to-book and price-to-earnings multiple, good value in an expensive market.

BARRICK GOLD (ABX.TO)

Barrick has gone through a massive reorganizing process and is now stabilizing nicely. We continue to look for gold stocks as a hedge against central bank insanity of which there’s a lot. In anticipation that if the stock markets peak out and let go, there’ll be more insanity coming along. President Trump for one, will hemorrhage if there’s any concerted market weakness (certainly before November of this year), leaning on the Fed to bail his policies out. That’d be very bullish for gold bullion.

PAST PICKS: SEPT. 1, 2017

COMINAR REIT (CUF_u.TO)

• Then: $13.61
• Now: $12.06
• Return: -11%
• Total return: -6 %

ALAMOS GOLD (AGI.TO)

• Then: $10.27
• Now: $7.10
• Return: -31%
• Total return: -31%

TD BANK (TD.TO)

• Then: $67.50
• Now: $75.28
• Return: 12%
• Total return: 14%

Total return average: -8%

TWITTER: @SVAInsights
WEBSITE: Strategicanalysis.ca
BLOG: The Occasional Contrarian