I find that I am inclined to agree with a recent BMO report that talks about muted returns for the next 5 years.  They are looking at 5 years of weak growth and that they expect this to be reflected in many asset classes and income generation from bonds will continue to be difficult with rates near historic lows.  If this outlook is correct investors are advised to be overweight in stocks relative to fixed income and I would focus on safe  dividend paying companies that are good value.

I would recommend a well-diversified portfolio regardless of your outlook as a method for reducing risk.

The TSX has had a nice bounce back from what was a terrible start to the year (and from a bad 2015) and we will have a nice gain for the first quarter of 2016.  Unfortunately I don’t expect this to continue and would be looking to take profits especially in  speculative investments.  Be careful of the gains that have come in the oil and mining stocks, they could evaporate very quickly.

TOP PICKS:

Information Services Group (ISV.TO) 

Located in Saskatchewan, it is in the registry business and related services like survey plans and maps. This is a relatively small company at $250 market cap and has been public for about 3 years, it has low trading volume but it has great value.  The stock is trading for about 13 times forward earnings and at an impressive 10% free cash flow to enterprise value and is  very cheap.  It also has a 5.6% dividend yield so you get paid to wait. 

Valener (VNR.TO)

It may not be familiar to most investors.  It is the public investment vehicle of the better known Gaz Metro Partnership.  I like the dependable forecastable nature of its business of gas distribution.  It is trading at about a market multiple but at only about one times book value.  It has a dividend yield of 5.2% and low debt to equity levels of .15:1.  Valener has good free cash flow of 7%.  The stock has had a good run recently but we expect some more over the next year.

Descartes Systems Group (DSG.TO)

Out of Waterloo is a software company that provides logistic solutions to corporations.  DSG is one of our top rated S&V Strategy stocks.  While the P/E multiple is 18.4 times, it has no net debt  and free cash flow of 3.7%.  Analysts have been increasing their estimates in an effort to keep up with the company results.  The stock has corrected recently and has now resumed its upward trajectory.  This is a decent entry point. 

Past Picks: May 14, 2015

Magna International (MG.TO)

Dominion Diamond (DDC.TO)  (SOLD AT $20.03 IN JUNE 2015)

Ritchie Bros. Auctioneers (RBA.TO)

Total Return Average : -17.04%