David Fingold, vice president and portfolio manager at Dynamic Funds 

Focus: North American and global stocks
_______________________________________________________________

MARKET OUTLOOK
As a bottom-up stock picker, I don't normally provide market forecasts. The direction of the market is more important to users of index funds and closet index investors (of course, that likely accounts for over 75 per cent of investors, but they won't be interested in what I have to say). We tend to stay near fully invested unless credit markets become unglued. A look at the Investment Grade Credit Index would suggest that there is no need for immediate concern. Perhaps investors in ultra-expensive defensive issues such as REITs, utilities and telecommunications should also be concerned. Those issues appear to be priced for a continued environment with no growth. Investments in consumer staples should likely be quite selective given they have been bid up by the same buyers as other high-dividend, yield-paying industries. The valuation of high-dividend yield companies is at record levels. 

At the same time, there is much to choose from for anyone looking to build a concentrated portfolio of high-quality companies with some prospect of growth. What we mean by that are companies with strong balance sheets and margins and returns that are well above average.

TOP PICKS

BELIMO HOLDING AG (BEAN.SW)
Hinwil, Switzerland-based leading producer of HVAC actuators. They invented the direct connect actuator and networked them, and the latest models are programmable using handheld devices. Customers get a rapid payback from energy savings by installing their devices during renovation or new construction. Their margins and returns on invested capital are extremely high. They have a significant net cash position.

PARKER-HANNIFIN CORP. (PH.N)
Mayfield, Ohio-based producer of hydraulic and pneumatic systems and filtration technology. Parker's systems and components are used extensively in aerospace, machine tools, automation solutions and semiconductor process equipment. In the motion control industry, they have a #1 market share. They have been increasing their dividend for 60 years, have a long-term record of generating an over-10-per-cent cash flow margin, and cash generation has consistently exceeded earnings. 

KEYSIGHT TECHNOLOGIES INC. (KEYS.N)
Santa Rosa, California-based producer of electronic test equipment founded by William Hewlett and David Packard in 1939 in Packard's garage. The industry is highly consolidated and provides testing solutions to civilian and military electronics manufacturers. Growth is expected in the future due to the move toward 5G wireless and increasing defence budgets. The company should be able to grow in mid-single digits with an operating profit margin of 20 per cent over a cycle.
 

PAST PICKS: NOVEMBER 23, 2016

INFICON (IFCN.SW)

• Then: 358.00 CHF
• Now: 485.50 CHF
• Return: +35.62%
• TR: +35.61%

SMC CORPORATION (SMCAY.PK)

• Then: 32,170 YEN
• Now: 32,730 YEN
• Return: +1.74%
• TR: +1.74%

BELIMO HOLDING AG (BEAN.SW)

• Then: 2960 CHF
• Now: 3351 CHF
• Return: +13.21%
• TR: +13.21%

TOTAL RETURN AVERAGE: +16.95%