David Cockfield, managing director and portfolio manager at Northland Wealth Management

Focus: Canadian equities and ETFs
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MARKET OUTLOOK
The TSX is now trading some 800 points below its best level reached in 2017, performing well behind U.S. equity indices. Two major sectors of the TSX — energy and financials — have recently performed quite poorly. Energy stocks are depressed by OPEC’s failure to raise oil prices. Financials, particularly the banks, have suffered from foreign investors selling based on concerns about high housing prices in Vancouver and Toronto. We see these concerns as legitimate, but overdone. Capital spending in the energy sector has fallen by tens of billions of dollars, which will eventually lead to falling supply and firmer prices. Toronto and Vancouver housing prices are showing signs of moderating, and indications that low interest rates will be with us for some time will mean bank mortgage portfolios are not at immediate risk. Any improvement in these sectors will improve TSX performance in upcoming quarters. We expect choppy but upward-trending equity markets in the latter half of 2017 based on reasonable economic growth and improving corporate earnings both in Canada and the U.S.

TOP PICKS

BMO COVERED CALL CANADIAN UTILITIES ETF (ZWU.TO)
This ETF provides exposure to an equal-weight portfolio of utilities, telecoms and pipelines stocks. Additional earnings are generated by writing out the money call options on securities held. Canadian securities make up 64 per cent of the portfolio with U.S. securities at 36 per cent. Utilities, such as Fortis, make up 41 per cent of the portfolio. Pipelines, such as TransCanada, make up 32 per cent, while telecommunications such as Telus are at 27 per cent. The portfolio is rebalanced in June and reconstituted in December. This ETF provides an excellent yield of 6.4 per cent from a high-quality diversified portfolio. Last purchased in May at $14.13.

BMO LOW VOLATILITY CANADIAN EQUITIES ETF (ZLB.TO)
This ETF provides investors with a diversified high-quality portfolio of low-beta Canadian and U.S. equities. Low-beta stocks are less sensitive to day-to-day market movements and have tended to outperform in difficult markets. The beta of the ETF portfolio is 0.74 per cent with a dividend yield of 2.74 per cent. Management expense is 0.71 per cent. Last purchased in June at $30.05.

NORBORD INC. (OSB.TO)
Norbord is one of the largest global producers of oriented strand board (OSB), a type of engineered lumber made by compressing layers of wood chips with adhesive. The panel board created is similar to plywood and is widely used in new housing. Demand has expanded rapidly with the recovery in U.S. housing. The company expects demand to exceed supply in 2018 and is restarting its mothballed mill. The company has recently tripled its dividend and now yields 3.0 per cent. Last purchased in May at $38.92.
 

PAST PICKS: MAY 27, 2016

TD BANK (TD.TO)

• Then: $57.67
• Now: $65.28
• Return: 13%
• TR: 17%

BMO LOW VOLATILITY US EQUITY ETF (ZLU.TO)

• Then: $29.08
• Now: $31.24
• Return: 7%
• TR: 10%

BAYTEX ENERGY (BTE.TO)

• Then: $6.20
• Now: $2.95
• Return: -52%
• TR: -52%

TOTAL RETURN AVERAGE: -8%