Steve DiGregorio, portfolio manager at Canoe Financial
Focus: Canadian dividend-paying stocks, preferred shares and options

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MARKET OUTLOOK

Our portfolio is currently at its lowest U.S. weighting ever, with 7.4 per cent exposure. We believe the Canadian market will benefit from a lower valuation, the late-cycle market, the energy rebound, increased passive flows and increased active flows. The portfolio is geared towards Canadian companies with foreign sales (Open Text, Nutrien, Transforce, CGI, SNC). It’s still positioned to generate returns in a flat/sideways market. We estimate around 40 per cent of the portfolio is in non-correlated investments. We’ve used our high-cash position to sell cash covered puts this year. High volatility and skew has made these options attractive. 

Looking at the traditional go-to Canadian large-cap dividend stocks, it’s been tough for dividend-payers, specifically leveraged companies. We anticipate there’ll still be some softness here, but acknowledge valuations are getting very attractive. We still prefer growth names with an options strategy.

Examining the last late-cycle rally, the S&P/TSX Composite outperformed the S&P 500 the 12 months prior to the market peak (June 2008) by 19 per cent. Also, energy advanced by 30 per cent the first half of 2008. Feels a lot like 2018?

Valuations are also very supportive of bringing capital back to Canada, with the TSX trading at 17.7 times versus a 10-year average of 18.7 times. Conversely, the S&P 500 currently trades at 20.8 times versus a 10-year average of 17.5 times.

TOP PICKS

OPEN TEXT  (OTEX.TO)

SNC-LAVALIN (SNC.TO)

ARTIS REIT PREFERRED SHARES SERIES I (AX_pi.TO)

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
OTEX N N Y
SNC N N Y
AX_pi Y Y Y

 

PAST PICKS: JAN. 23, 2017

MAXAR TECHNOLOGIES (MAXR.TO)
Formerly MacDonald, Dettwiler and Associates Ltd

  • Then: $72.33
  • Now: $66.03
  • Return: -9%
  • Total return: -6%

BOARDWALK REIT (BEI_u.TO)

  • Then: $47.03
  • Now: $45.90
  • Return: -2%
  • Total return: 4%

CINEPLEX (CGX.TO)

  • Then: $52.11
  • Now: $31.03
  • Return: -40%
  • Total return: -37%

Total return average: -13%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
MAXR N N N
BEI_u N N N
CGX N N N

 

WEBSITE: http://www.canoefinancial.com/