Christine Poole, CEO and managing director at GlobeInvest Capital Management

Focus: North American large caps
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MARKET OUTLOOK
The global economy is expanding which bodes well for corporate profit growth and is supportive of rising equity markets. While concerns of higher interest rates dominate headlines, expansionary monetary policies by central banks since the Great Recession has resulted in historically low interest rates globally. The path to interest rate normalization from an abnormally low level is inevitable and signals confidence from central bank authorities that economic growth in their respective jurisdictions is self-sustaining. Already underway, the pace of interest rate increases in the U.S. is expected to be measured and well-telecast, given tepid inflationary pressures and geopolitical uncertainty.

Sentiment, manufacturing and services indices reinforce an expanding global economy. The U.S. continues to post robust job growth, adding a cumulative 1.7 million full-time jobs so far in 2017 — the best performance in seven years. In Canada, employment gains in June came in well above consensus, driving the unemployment rate down to 6.5 per cent, its lowest level in the current cycle.

Q2/17 earnings season will provide insight and extent of follow-through from survey/sentiment data to hard corporate profits. Historically, S&P 500 revenue yearly growth is positively correlated to the U.S. ISM Manufacturing Index, which jumped to a three-year high of 57.8 in June. Current consensus projections indicate Q2/17 earnings per share (EPS) growth of 7.7 per cent, 11.4 per cent for 2017 and 11.9 per cent in 2018. In Canada, the pace of earnings growth will be influenced by energy prices, which have pulled back from levels at the beginning of the year, but remain above from a year ago. For the TSX Composite, 2017 consensus EPS are forecast to be up 22 per cent in 2017 or 11 per cent excluding Energy.       

Economic data, leading indicators, forward-looking surveys and the shape of the U.S. Treasury Yield Curve do not suggest a recession on the horizon. Thus, our constructive view on equities prevails.

TOP PICKS

CHARTWELL RETIREMENT RESIDENCES (CSH_u.TO)
Chartwell is the largest provider of seniors housing communities in Canada. Demand for seniors housing is robust, driven by an aging population and increased life expectancy. According to Statistics Canada, the 75-years+ seniors population in Canada will more than double from 2.5 million in 2016 to 5.5 million in 2036. The industry is relatively fragmented, with the top 15 retirement home operators accounting for 43 per cent of total suites. Chartwell offers retirement homes across the continuum of care: independent living (five per cent), independent supportive living (72 per cent of suites), assisted living (five per cent), long-term care (17 per cent) and memory care (one per cent). Geographically, 53 per cent of its suites are in Ontario, 34 per cent in Quebec, 10 per cent in British Columbia and three per cent in Alberta. Chartwell provides an attractive income yield of 3.8 per cent.  

Recently purchased in the $15.40 range in July 2017.

CGI GROUP (GIBa.TO)
CGI is a global technology services firm deriving 55 per cent of its revenues from outsourcing and 45 per cent from systems integration and consulting. Its revenue breakdown by geography consists of approximately 55 per cent from Europe, 25 per cent from the U.S., 15 per cent from Canada and five per cent from Asia Pacific. CGI services numerous sectors including government, financial services, health care, telecommunications and utilities, and manufacturing/retail/distribution. The digitalization of business processes and cybersecurity are some of the services CGI provides. Management remains focused on creating shareholder value through profitable organic growth, accretive acquisitions at reasonable prices within a consolidating IT services market and share repurchases. 

Recently purchased in the $65.40 range in July 2017.

MONDELEZ INTERNATIONAL (MDLZ.O)
MDLZ is the global snacking leader with the No. 1 global share in biscuits and candy as well as No.2 in chocolate and gum. By category, biscuits represent 41 per cent of sales, chocolate 30 per cent, gum and candy 15 per cent, cheese and grocery eight per cent and beverages six per cent. Its portfolio of power brands include Oreo, beVita, Cadbury, Toblerone, Trident, Dentyne and Halls. Mondelez’s long-term earnings growth is supported by an attractive demographic footprint with 35 per cent of revenues from emerging markets, where growth of the middle-income population is expected to surge over the next 15 years. Per capita consumption of confectionary and biscuits in developing countries are significantly below that of developed countries and is expected to increase as personal income levels rise. Mondelez provides investors with a dividend yield of 1.8 per cent.

Recently purchased in the $43.35 range in July 2017.
 

PAST PICKS: JULY 12, 2016

WHIRLPOOL (WHR.N)

• Then: $173.72
• Now: $193.50
• Return: +11.38%
• TR: +14.00%

ALPHABET (GOOGL.O)

• Then: $732.51
• Now: $960.97
• Return: +31.18%
• TR: +31.18%

LOBLAW (L.TO)

• Then: $70.74
• Now: $71.01
• Return: +0.38%
• TR: +1.86%

TOTAL RETURN AVERAGE: +15.68%