Alex Ruus, Portfolio Manager, Arrow Capital Management
Focus: North American Equities

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MARKET OUTLOOK:

Following another successful year for clients of the Leaders fund, we look forward to another profitable year for the fund in 2017. The emergence of a business-oriented President, Senate, and House in the world’s largest economy, the USA, provides the backdrop for another year of global growth this coming year. While we are likely to experience some ups and downs during the year as the new President’s actual policy implementation plays out, the overall control of government by pro-growth individuals is likely to help the U.S. economy to another year of positive growth. Offsetting this will be a slow gradual rise in U.S. interest rates over the course of the year. This atmosphere should provide the positive backdrop for well-run leading companies, like we own in the fund, to continue to build shareholder value. We look forward to another profitable year.

Top Picks:

Magna International (MG.TO)

Magna is the world’s 2nd largest independent auto parts supplier. Magna is an innovative global leader in several key auto parts segments, led by a strong management team, with a demonstrated record of shareholder value creation. The company is steadily building shareholder value and returns value to shareholders through a rising dividend accompanied by numerous share buybacks. We own the company and believe it is undervalued trading at 7 times earnings and a 2.4 per cent dividend yield. (last purchased February 21, 2017 at $59.85/share)

Element Fleet (EFN.TO)

Element Fleet is a leading independent finance company operating in asset-based financing, led by an experienced management team. The company has jumped into a void in the leasing market following the 2008 downturn and is emerging as one of the leaders in the space. The company is undervalued at 8 times next year’s earnings. (last purchase November 8, 2016 at $12.40)

United Parcel Service (UPS.N)

UPS is the world’s Leading small package logistics company with a dominant position. UPS produces prodigious amounts of free cash flow and has a dominant market position. The stock trades at an attractive 16 times earnings and 3.1 per cent dividend yield. (last purchased February 21, 2017 at $107.52)