Peter Hodson, CEO and head of research at 5i Research

Focus: Canadian small- and mid-cap stocks
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MARKET OUTLOOK
The theme we are seeing in the markets has remained the same, really, with earnings, interest rates and the election in focus. The election campaigns are sure to drop more bombshells in the final days, so stay tuned for the scandals and revelations of indiscretions. It is hard to believe that these are the two best candidates a country with 330 million people can come up with! Mergers are continuing, and earnings —so far — have been “okay”. But market reactions are all over the map, so be prepared for a wild couple of weeks. We think once the election is out of the picture, markets may find a direction, and it will largely depend on how earnings pan out for the third and fourth quarters. We are not overly concerned about interest rates. They will be moving higher, but we think markets are more than prepared for this. We could be at an “earnings trough” and if so, markets could move nicely. Investors are far too pessimistic on various concerns, but things really are not that bad.

TOP PICKS

SPIN MASTER (TOY.TO)
A Canadian toy manufacturer with good knowledge of the market, which is key. The stock has done well since its IPO at $18, and the all-important Christmas season is coming up. A recent tour of Walmart shows it practically owns the department this year, with high-margin fast-selling products. 21X earnings with very good growth predicted. It has strong management and a strong balance sheet.

PARKLAND FUEL (PKI.TO)
A marketer and distributor of fuels and an operator of gas stations. It has a nice relationship with Alimentation Couche-Tard and has an agreement to buy CST Brands' Canadian division after Alimentation buys CST. Parkland is driving down costs and improving margins, and offers a nice dividend. Not cheap at all, but worth it and cash flow is good.

GREAT CANADIAN GAMING (GC.TO)
The company is now worth $1.3 billion, and recent expansions into Ontario and eastern Canada bode well for the future. It is a prolific buyer of its own stock: the share count has dropped by 25 per cent in ten years. No dividend, but earnings leverage is increasing with fewer shares. There is BC risk but at 18X earnings with expected growth of 20 per cent+ over the next couple of years, it looks good.
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
TOY N N N
PKI N N N
GC N N N


PAST PICKS: OCTOBER 13, 2015

ALIMENTATION COUCHE-TARD (ATDb.TO)

  • Then: $61.25
  • Now: $67.75
  • Return: 10.61%
  • TR: 11.14%

KNIGHT THERAPEUTICS (GUD.TO)

  • Then: $7.24
  • Now: $8.69
  • Return: 20.09%
  • TR: 20.09%

SCOTIABANK (BNS.TO)

  • Then: $60.30
  • Now: $71.45
  • Return: 18.49%
  • TR: 24.03%

TOTAL RETURN AVERAGE: +18.42%
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
ATDb N N N
GUD N N N
BNS N N N


FUND PROFILE: 5i RESEARCH MODEL BALANCED PORTFOLIO
PERFORMANCE AS OF OCTOBER 31, 2016:
  • 1 month: Fund +1.89%, Index* 0.62%
  • 1 year: Fund +18.09%, Index* 12.71%
  • 3 year: Fund +88.34%, Index* 21.1%

* Net of fees
* Index: TSX Composite


TOP HOLDINGS AND WEIGHTINGS

  1. Savaria: 6.7%
  2. Constellation Software: 5.6%
  3. Kinaxis: 5.2%
  4. Magna: 5.2%
  5. Stella Jones: 5%


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WEBSITE: www.5iresearch.ca
BLOG: www.5iresearch.ca/blog
OTHER: www.canadianmoneysaver.ca