Ryan Modesto, managing partner at 5i Research

Focus: Canadian small- and mid-cap stocks
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MARKET OUTLOOK
Believers in efficient markets are taking it on the chin in 2016 between the Brexit result and recent events with the U.S. election. Not only did forecasters get the election result wrong, but also the markets proceeded to do the exact opposite of what everyone thought would happen in the “off chance” that Donald Trump won. What is interesting to us is that just three months ago, one of the big concerns about markets were valuations and many thought a pullback was required or overdue. Now we have U.S. markets rallying to record highs largely on expectations of a government policy framework that has yet to come. While we continue to believe that staying invested for the long term is the appropriate strategy, we would caution investors chasing the latest hot sector or stock.

TOP PICKS

SUN LIFE FINANCIAL (SLF.TO)
This is a good way to gain exposure to the U.S. financial markets and interest rates through a Canadian stock. They are growing in the U.S. and increased the dividend recently. While the fundamentals continue to improve, the changes occurring in the U.S. should help to support the shares.

STANTEC (STN.TO)
Stantec had a good quarter recently with a beat on revenues and shares being further supported by the expectations of increased infrastructure spending. We think it is a good way to get exposure to both Canadian and U.S. infrastructure plans with nearly 60 per cent of revenues coming from the U.S. STN is also integrating a large acquisition in the form of MWH Global, which provides a foothold in water infrastructure.

TIO NETWORKS (TNC.V)
TIO is a bill payment processor partnering with large U.S. utilities. They have dealt with one of our bigger concerns which was customer concentration through a recent acquisition. We think TNC will be able to cross-sell and increase value to their partners and shareholders over time while having the potential to make some interesting acquisitions.
 

PAST PICKS: SEPTEMBER 30, 2016

GREAT CANADIAN GAMING (GC.TO)

• Then: $22.84
• Now: $23.96
• Return: +4.90%
• TR: +4.90%

STELLA JONES (SJ.TO)

• Then: $45.51
• Now: $45.37
• Return: -0.30%
• TR: -0.30%

SPIN MASTER (TOY.TO)

• Then: $31.31
• Now: $38.44
• Return: +22.77%
• TR: +22.77%

TOTAL RETURN AVERAGE: +9.12%