Bruce Campbell, President & Portfolio Manager, Campbell, Lee & Ross

Focus: Canadian Large Caps

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MARKET OUTLOOK:

With Brexit behind us the market is moving to all-time highs in the U.S. The UK is small and uncertainty elsewhere bring us back again to the U.S. as a safe haven. Bond yields are so low that equities with yield are again the place to be. Corporate, investment grade bonds will do well. Although valuations aren’t cheap, the S&P may trade over 20x as it has in the past. If so, if renewed earnings growth of 3-to-4 per cent in the back half of the year, we should see markets push through the all-time highs by 3-to-4 per cent.

Earnings growth will be rewarded, and sectors that will benefit will be industrials, consumer discretionary and technology. Financials are cheap and should go higher later in the year. As long as rates stay at almost zero, gold will have a place in portfolios but should pause here until the fall.

Top Picks:

Torex Gold (TXG.TO)

Torex is a gold producer in Mexico that has just recently declared commercial production. For that reason we believe that it had been a valuation laggard until that point. It is making up that discount rapidly but we still believe there is further room plus growth through the next 12 months will be substantial. Recent purchase at $22.50 in June where we added more.

Alimentation Couche-Tard (ATDb.TO)

Couche-Tard is the world’s most dominant owner/consolidator of convenience stores. The company should be able to take advantage of Brexit-caused uncertainties in Europe and has more to do in the U.S. The stock has underperformed and trades at about 4 multiples lower than it did a year ago. A rare chance to buy it cheap. Recent purchases were yesterday at $54.25.

H&R REIT (HR_u.TO)

H & R is a diversified REIT with shopping centre, office and industrial properties across the country. They will be a beneficiary of funds’ flow into the real estate sector in August as it becomes its own group within the TSX and the S & P. H & R is the second largest market cap, it trades at a 30 per cent discount to its peers (mostly due to its Calgary office exposure). But, Encana bears the brunt of sub-letting space they aren’t using, H & R sees no downturn. It is less than 10 per cent of total space so provides an opportunity with a 6 per cent yield which is hard to come by. Recent purchases were at $22.30.

Past Picks:  July 27, 2015

Bank of America (BAC.N)

• Then: $17.67
• Return: $13.52
• Return: -23.51%
• TR: -22.51%

BlackRock (BLK.N)

• Then: $336.24
• Return: $350.69
• Return: +4.30%
• TR: +7.11%

Merus Labs (MSL.TO)

• Then: $2.93
• Return: $1.61
• Return: -45.05%
• TR: -45.05%

Total Return Average: -20.15%

Twitter: @campbellandlee

Website: www.clrim.com