Feb 26, 2020
Ryan Modesto's Top Picks: Feb. 26, 2020
BNN Bloomberg
Full episode: Market Call for Wednesday, February 26, 2020
Ryan Modesto, chief executive officer at 5i Research
Focus: Canadian small- and mid-cap stocks
MARKET OUTLOOK
The coronavirus is what markets are focused on right now and rightly so. A lot of uncertainty remains around the outbreak and its impact on the economy. Until the virus and the degree to which it can be contained are better understood, we expect market volatility to be heightened. The large amount of (often conflicting) information around the virus only adds to the confusion.
In terms of areas most negatively impacted, we would expect economically sensitive companies and retail names to be some of the hardest hit. Essentially, anything that revolves around travel and tourism, as well as companies that require “public gatherings” like retail stores are likely to have a tough time in the near term. Industrial companies that rely on manufacturing from China are also areas likely to get a cold shoulder from markets.
Taking a more optimistic outlook, we do think that this whole issue will be shorter-term in nature. We prefer to focus on the fundamentals of a company and think about where it will be three years from now as opposed to three months from now. It is not always easy, but thinking long term and remaining appropriately diversified has been the key to success in the past and we expect it to remain so going forward.
TOP PICKS
REAL MATTERS (REAL TSX)
We like to think of Real Matters as the Uber of real estate transactions. The company connects lenders to appraisers and takes a fee for making these connections in an efficient and convenient manner while often providing more competitive pricing. The company is growing quickly, but also improving margins as it grows and faces a large market.
CANADA GOOSE (GOOS TSX)
This is more of a contrarian investment at this stage. Canada Goose has seen its shares decline largely on virus-related impacts. Short-term virus concerns aside, we do not see a whole lot changing here. Canada Goose continues to hold a desirable market position, with a premium and high-margin product that has been growing fast. We do not think the story is done yet.
GDI INTEGRATED FACILITY SERVICES (GDI TSX)
GDI offers janitorial and technical services to facilities. It is a growth-by-acquisition story operating in a fragmented industry and seeing good growth in the U.S. The business tends to be sticky and the access to capital gives GDI an advantage over many of its competitors.
DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
---|---|---|---|
REAL | N | N | N |
GOOS | N | N | N |
GDI | N | N | N |
PAST PICKS: MARCH 29, 2019
CAE (CAE TSX)
- Then: $29.61
- Now: $38.27
- Return: 29%
- Total return: 30%
GILDAN ACTIVEWEAR (GIL TSX)
- Then: $48.05
- Now: $34.07
- Return: -29%
- Total return: -28%
PARK LAWN CORP (PLC TSX)
- Then: $27.49
- Now: $27.39
- Return: -1%
- Total return: 1%
Total return average: 1%
DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
---|---|---|---|
CAE | N | N | N |
GIL | N | N | N |
PLC | N | N | N |
FUND PROFILE
Balanced Equity Model Portfolio
Performance as of Jan. 31, 2020
- 1 month: 2.4% Fund, 1.7% Index
- 1 year: 11.8% Fund, 14.98% Index
- 3 years: 22.9% Fund, 23.2% Index
INDEX: TSX Composite.
Returns are based on reinvested dividends, net of fees and annualized.
Company Twitter Handle: @5iresearchdotca
Personal Twitter Handle: @5iRyan
Website: www.5iresearch.ca
Blog: www.5iresearch.ca/blog