Ryan Modesto, chief executive officer of 5i Research 
FOCUS: Canadian small and mid-cap stocks
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MARKET OUTLOOK

2017 was the year almost everything went up! While a year like this is great for most investors, expectations should be tempered, as not every year will be like it. Of course, while the gains look simple and easy looking back, the return numbers do not show the continued claims of overvaluation on every up day the markets had, or the various calls of stocks being in a bubble, or concern that FAANG stocks were becoming too large, or NAFTA or any other multitude of issues that can be pointed out. At almost every point in North American markets in the past year, selling was the wrong decision. So if you did well in 2017, give yourself some credit, because sometimes not selling in a strong market is the hardest thing to do.

Heading into 2018, we think companies are set up for a strong fourth quarter with consumers being strong going into the holiday season and momentum in company results remaining strong. Add in the global growth picture and potential benefits from tax changes in the U.S., and we think markets are setting themselves up for a fine year. Regardless of what happens in 2018, we believe that thinking long-term and remaining diversified across sectors and geographies will always remain a key to investor success.

TOP PICKS

DOLLARAMA (DOL.TO)
A very shareholder-friendly company. Repurchased five per cent of shares last year. Since 2012, it has repurchased 24 per cent of shares while seeing the stock rise over 400 per cent in the same period. Investors often get concerned with the valuation, which is fair. However, the company’s ability to increase prices over time to generate organic growth while adding stores makes it interesting. They are also looking at bulk online sales, which could be a good growth business for them.

BRP INC. (DOO.TO)
Maker of Sea-Doos and Ski-Doos as well as ATVs. We view DOO as a way to get exposure to economic growth through increased discretionary spending as well as baby boomer spending and growth in China. Recently initiated a dividend, has been buying back shares and has a strong economic backdrop supporting purchases.

DESCARTES SYSTEMS (DSG.TO)
Trying to simplify complex logistics and supply chain processes. Focused on transportation, logistics and distribution companies.  Revenues tend to be stable and sticky, leading to a higher valuation. A consistent performer that should only benefit from increased shipping volumes and complexity/regulations for cross border trade.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
DOL N N N
DOO N N N
DSG N N N

PAST PICKS: NOVEMBER 25, 2016

SUN LIFE FINANCIAL (SLF.TO)

  • Then: $53.49
  • Now: $51.47
  • Return: -3.77%
  • Total return: 0.60%

STANTEC (STN.TO)

  • Then: $35.85
  • Now: $35.01
  • Return: -2.34%
  • Total return: -0.59%

TIO NETWORKS (TNC.V) – Delisted on July 17, 2017

  • Then: $2.60
  • July 17, 2017: $3.33
  • Return: 28.07%
  • Total return: 28.07%

TOTAL RETURN AVERAGE: 9.36%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
SLF N N N
STN N N N
TNC N N N

FUND PROFILE
Balanced Equity Model Portfolio
Performance as of: November 30, 2017

1 Month: 2.87% fund, 0.47% index
1 Year: 13.62% fund, 9.6% index
3 Year: 42.61% fund, 19.15% index

*Index: S&P/TSX Composite Total Return Index
**Dividends are reinvested

TOP HOLDINGS AND WEIGHTINGS

  1. Savaria: 6.2%
  2. Magna International: 6.01%
  3. Premium Brands Holdings: 5.9%
  4. Constellation Software: 5.9%
  5. CCL Industries: 5.48%

TWITTER: @5iRyan
WEBSITE: www.5iresearch.ca