Alex Ruus, portfolio manager at Arrow Capital Management 
Focus: North American equities
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MARKET OUTLOOK

Following a successful 2017, we are looking forward to another year of a good economy in 2018. Expect to see continuing solid economic fundamentals underlying the global economy. The world’s largest economy, the USA, is growing at its strongest rate since the great recession and is approaching full employment. The USA’s strong performance will propel the entire global economy to solid growth. Financial markets had a similarly strong year and given the continuing strong economy, we see the backdrop for another up year for markets in 2018, although it is unlikely to be as strong as 2017. Similarly, the record low volatility of 2017 is also unlikely to be replicated and we are likely to see a correction at some point during the year. We believe the new year will see the importance of security selection increase as 2017 saw some remarkable divergences in performance from different areas of the market.

TOP PICKS

MAGNA INTERNATIONAL (MG.TO)
The world’s second-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 6x earnings and a 1.9 per cent dividend yield. Last purchased on January 16, 2018 at $72.84.

UNITED PARCEL SERVICE (UPS.N)
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 18x earnings and 2.5 per cent dividend yield. Last purchased on October 25, 2017 at US$118.

ELEMENT FLEET MANAGEMENT (EFN.TO)
A global leader in fleet management with the #1 position in North America, led by an experienced management team. The company has jumped into a void in the market following the 2008 downturn and has emerged as a new leader in the space. The company is undervalued at 9x next year's earnings and has an attractive and growing 3.3 per cent dividend. The company trades at a discount to both the market and comparable companies, despite its attractive valuation, and could be a takeover target by either a competitor or private equity. Last purchased on January 16, 2018 at $9.19.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
MG Y Y Y
UPS Y Y Y
EFN Y Y Y

PAST PICKS: MAY 15, 2017

ANTHEM (ANTM.N)

  • Then: $182.30
  • Now: $241.44
  • Return: 32.44%
  • Total return: 33.79%

MICROSOFT (MSFT.O)

  • Then: $68.43
  • Now: $88.76
  • Return: 29.71%
  • Total return: 31.80%

FREEHOLD ROYALTIES (FRU.TO)

  • Then: $14.01
  • Now: $14.54
  • Return: 3.78%
  • Total return: 6.75%

TOTAL RETURN AVERAGE: 24.11%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
ANTM Y Y Y
MSFT Y Y Y
FRU Y Y Y

FUND PROFILE
Exemplar Leaders Fund – Class F
Performance as of: December 31, 2017

1 Month: -0.71% fund, 1.20% index
1 Year: 10.89% fund, 9.10% index
3 Year: 8.78% fund, 6.59% index

*Index: S&P/TSX Composite Total Return
**Fund’s returns are based on reinvested dividends and are net of fees

TOP HOLDINGS AND WEIGHTINGS

  1. Freehold Royalties: 6.60%
  2. Anthem: 6.46%
  3. Microsoft: 6.09%
  4. Magna International: 4.37%
  5. United Parcel Service: 3.99%

TWITTER: @ArrowCapital
WEBSITE: www.arrow-capital.com