Peter Hodson, founder and head of research at 5i Research
Focus: Canadian small- and mid-cap stocks

MARKET OUTLOOK

We don't understand why everyone is so bearish right now. Everyone seems to want a big recession and market correction. But based on 40 years of experience, problems don't typically happen when everyone is anticipating them. We see OK corporate earnings, high employment, lots of takeovers, dividends increasing and reduced valuations (due to pessimism). Sure, there is going to be a recession some day, but so what? Most (other than 2008) are short and shallow. We know investors who have been sitting on cash for seven years. The market could drop 50 per cent and fully-invested investors would still be ahead of these scaredy-cats. In addition, if you are still working and have cash to invest (more money than expenses), then why would you even want the market to go up now?

What is there to worry about? Lots. But there always is in the market. We don't like the trade war. We are a little worried about what Trump might do if he gets elected, knowing that re-election only happens once. He might really take off the gloves next November, but until then we think things are going to be OK.

TOP PICKS

Peter Hodson's Top Picks

Peter Hodson of 5i Research shares his top picks: Boyd Group, ECN Capital and WSP Global.

BOYD GROUP INCOME FUND (BYD-U:CT) 

Boyd is finally converting to a corporate structure, which will open up its shares to new investors who have been prohibited from investing in a trust. Just good execution over the past 10 years, with lots of acquisitions still to be made, and the company might even be recession-proof (if car owners fix cars rather than buy them).

ECN CAPITAL (ECN:CT)

ECN just completed a very large buyback and shares have responded, up 34 per cent this year. The dividend was doubled in February. Steve Hudson knows the finance/leasing space. It’s got a cheap valuation at 13-times earnings, with very strong earnings growth coming next year. Lower interest rates and strong corporate business should support the valuation.

WSP GLOBAL (WSP:CT)

WSP is a well-run engineering firm which might get new business from the fallout from SNC-Lavalin. It’s got a big backlog, a decent valuation and good execution. Solid growth expected over the next 36 months, with good visibility.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
BYD-U N N Y
ECN N N Y
WSP N N Y

 

PAST PICKS: AUG. 3, 2018

Peter Hodson's Past Picks

Peter Hodson of 5i Research reviews his past picks: Covalon Technologies, Spin Master and Stingray Digital.

COVALON TECHNOLOGIES (COV:CV)

  • Then: $9.15
  • Now: $2.05
  • Return: -78%
  • Total return: -78%

SPIN MASTER (TOY:CT)

  • Then: $55.91
  • Now: $42.99
  • Return: -23%
  • Total return: -23%

STINGRAY DIGITAL (RAY/A:CT)

  • Then: $9.03
  • Now: $7.14
  • Return: -21%
  • Total return: -17%

Total return average: -39%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
COV N N Y
TOY N N Y
RAY/A N N Y

 

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