Full episode: Market Call for Tuesday, November 14, 2017
Ryan Modesto, chief executive officer at 5i Research
FOCUS: Canadian small and mid-cap stocks
Synchronization is the word of the day. Most market participants are talking about the fact that not since 2007 have all major economies been growing in tandem. Obviously with improving economies across the world, it is easy to see how this would bolster demand for goods and services of companies. Heading into the holiday season with a strong consumer, we do not think investors need to worry too much about the markets coming into year-end. However, with such strong results over the last year and higher valuations, we do think results with year-over-year comparable growth will be tougher to achieve. Essentially, upon the first quarter of the New Year, we think earnings season will need to be watched closely for declining growth.
GLUSKIN SHEFF (GS.TO)
We think there are a few things to like with GS. This is a company that pays a six per cent dividend and often an annual special dividend while holding a sustainable payout ratio. The new CEO has taken a decent sized position in the company recently as well. We also like that with improving global markets and markets in Canada, GS should have some tailwinds at its back. Finally, the arbitration with the co-founders has been settled and the payout is far less than many feared, so we think markets will begin warming up to this name again.
In the last two quarters, AVO has beat earning estimates by 51 per cent and 37 per cent respectively. We like the momentum in earnings coupled with a strong balance sheet improving outlook and attractive valuation. They are also adding a recurring revenue software business which could be very interesting if it grows.
Markets were nervous when KXS disclosed they lost a large customer, but this looks largely to be a non-issue as the company continues to grow and retain its customer base. This is one of the fastest growing tech companies in Canada and we think the recent downturn offers an opportunity. It is higher risk due to the valuation, but over the longer term we think it looks interesting.
PAST PICKS: SEPTEMBER 30, 2016
GREAT CANADIAN GAMING (GC.TO)
- Then: $22.84
- Now: $29.55
- Return: 29.37%
- Total return: 29.37%
STELLA JONES (SJ.TO)
- Then: $45.51
- Now: $50.21
- Return: 10.32%
- Total return: 11.41%
SPIN MASTER (TOY.TO)
- Then: $31.31
- Now: $48.76
- Return: 55.73%
- Total return: 55.73%
TOTAL RETURN AVERAGE: 32.17%
Balanced Equity Portfolio
Performance as of: October 31, 2017
1 Month: 2.96% fund, 2.73% index
1 Year: 10.3% fund, 11.5% index
3 Year: 43.97% fund, 19.85% index
*Index: TSX Composite Total Return
*Model porfolio. No fees are charged. All returns include reinvested dividends.
TOP HOLDINGS AND WEIGHTINGS
- Magna International: 6.02%
- Premium Brands Holdings: 5.95%
- Constellation Software: 5.89%
- CCL Industries: 5.86%
- Savaria Corp: 5.65%