Ryan Modesto, chief executive officer at 5I Research
Focus: Canadian small- and mid-cap stocks

MARKET OUTLOOK

If we look back at the last four years and compare the environment we had back then to the situation we’re in today, we see a lot of parallels:

  • Lots of fear and pessimism.
  • Low interest rates that look to stay low for some time.
  • Low inflation.
  • Slow but growing earnings.
  • Slow but growing North American economies.

One of the main differences is that back then we had valuations that looked richer compared to today. With the S&P 500 at 17 times earnings on a forward basis and the TSX at 16 on a trailing basis, valuations sit essentially right on long-term averages. This is in the context of low rates, which should justify some sort of premium in valuations.

While there are and always will be factors to be concerned with, we think it is difficult to be too pessimistic on markets in North America. An important question for investors to consider: While markets are focused on the next bear market or recession, are we prepared for the possibility that they may grind higher for another five years like we have just seen?

TOP PICKS

Ryan Modesto's Top Picks

Ryan Modesto, CEO of 5I Research, shares his top picks: Kinaxis, Parkland Fuel and Premium Brands.

KINAXIS (KXS.TO)

Recent turbulence with global trade should help Kinaxis highlight the value the software can add. The company has a good backlog, growth and high retention rates and investing for long-term growth.

PARKLAND FUEL (PKI.TO)

Parkland has set up a good platform for growth in the U.S. and internationally. The company has consistently been a generator of high returns on equity and recently released a strong quarter where guidance was increased.

PREMIUM BRANDS HOLDINGS (PBH.TO)

The recent investment by the Canada Pension Plan adds a lot of cash to the balance sheet that should allow Premium Brands to grow and do acquisitions. The management team has been long-term value creators and we expect this trend to continue going forward.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
KXS N N Y
PKI N N Y
PBH N N Y

 

PAST PICKS: SEP. 13, 2018

Ryan Modesto's Past Picks

Ryan Modesto, CEO of 5I Research, reviews his past picks: TFI International, CAE and The Stars Group.

TFI INTERNATIONAL (TFII.TO)

  • Then: $47.59
  • Now: $38.52
  • Return: -19%
  • Total return: -17%

CAE INC (CAE.TO)

  • Then: $26.40
  • Now: $36.02
  • Return: 36%
  • Total return: 38%

THE STARS GROUP (TSGI.TO)

  • Then: $30.50
  • Now: $20.65
  • Return: -32%
  • Total return: -32%

Total return average: -4%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
TFII N N Y
CAE N N Y
TSGI N N Y