Ryan Modesto, Managing Partner, 5I Research

FOCUS: Canadian Small and Mid-Cap Stocks

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MARKET OUTLOOK:

The Brexit result of Britain voting to leave the EU has blindsided just about everyone and markets have reacted with some sharp declines. While events like this can be hard to stomach we think it does provide an opportunity for investors to add to a portfolio at attractive prices and take advantage of the fear and uncertainty that takes over markets. In our view, for the Canadian investor, this result really should not have an overly material fundamental impact as companies in Canada do not have a whole lot of revenue exposure to the EU and Britain. Stock prices will move, but this does not mean profits of individual companies will drop with it. Some longer term implications are that this will take U.S. interest rate increases off of the table for some time now and other members of the EU will begin examining the pros and cons of holding their own referendums. 

Top Picks:

Airboss of America (BOS.TO)

Airboss is a cyclical company that produces specialty rubbers. Investor interest has worn off since the IRT acquisition some time ago but this defense business continues to have potential longer-term and shares are cheap. Companies in the resources industry are a big piece of revenues and with the recent strength in commodities, we would expect demand for Airboss products to slowly increase over time and view it as a derived demand type of play from a strengthening resource sector. 

Exco Technologies (XTC.TO)

There is a lot to like about XTC. The company has high insider ownership, a great dividend growth track record and is one of the faster growing companies amongst its peer group. At the current valuation, we think the downside risk is mitigated and investors have an opportunity to be rewarded through either earnings growth, dividend growth or expansion of the trading multiple.

Premium Brands Holdings (PBH.TO)

There are two factors that draw our attention to PBH. First, the consumer staples sector is quite thin in Canada and within the sector, many of the names are large, slow growth type of companies. This makes PBH one of the few choices for Canadian investors looking for consumer staples investments and if they are looking for growth, PBH is one of the only options we believe. Second, being in the specialty food segment, the company does not compete on cost as much as others and is able to generate stronger margins. 

Disclsoure Personal Family Portfolio/Fund
 BOS N  N  N 
XTC  N N  N 
PHB  N  N  N 

 

Past Picks:  March 3, 2016

Savaria (SIS.TO)

  • Then: $6.15
  • Now: $8.00
  • Return: +30.08%
  • TR: +30.87%

Andrew Peller (ADWa.TO)

  • Then: $25.50
  • Now: $26.93
  • Return: +5.61%
  • TR: +6.03%

Concordia Healthcare (CXR.TO)

  • Then: $39.45
  • Now: $27.80
  • Return: -29.53%
  • TR: -29.31%

Total Return Average: +2.59%

 

Disclsoure Personal Family Portfolio/Fund
SIS N N N
ADWa N N N
CXR N N N

 

Fund Profile

Balanced Equity Model Portfolio

Performance as of: May 31, 2016

1 month: Fund 4.99%, Index*1%

1 year: Fund 7.8%, Index*-3.31%

3 year: Fund 89.05%, Index* 21.73%

* Index: TSX Total return

* Identify if your fund’s returns are based on reinvested dividends. Returns provided must be net of fees!

Model Portfolio Top Holdings

  1. Savaria Corp - 6.18%
  2. Alimentation Couche Tard - 5.78%
  3. Stella Jones - 5.71%
  4. Magna International - 5.54%
  5. Kinaxis - 5.44%