Bruce Campbell, president and portfolio manager of Campbell, Lee & Ross
FOCUS: Canadian large caps
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MARKET OUTLOOK

After a quiet and frustrating summer, the S&P/TSX Composite has made up some of its underperformance versus the S&P in the last couple of months and is actually positive for the year.

The recent increase has to come from the two largest groups as it almost always does: energy and financials. Our banks have shown good third quarter numbers and the real estate bubble talk has calmed down. Dividend increases look like they will continue. Energy has rebounded from very oversold levels and now awaits further direction. The stocks have not done as well as you would expect given US$52 oil. Gas stocks have pulled back given the very warm weather in North America.

Markets are not cheap but alternatives are few, and fixed income except for rate-reset preferreds don’t offer much in the way of current return. The mutiples are in the high-teens based on next year's earnings, which means the market could move a little bit higher.

TOP PICKS

TRANSCANADA (TRP.TO)
Despite Energy East going away, the company has good five year growth with consistent dividend increases over that time period. You get a 4 per cent yield and some protection from higher rates. The stock is off from its peak as rates have increased over the summer and this provides a good entry point.

WALT DISNEY COMPANY (DIS.N)
The ongoing saga of ESPN and cord-cutting on the cable TV side has weighed down Disney’s shares for the past year or so. The stock currently trades at close to its cheapest valuation in several years. The new Star Wars movie is out shortly and ESPN is flattening out on the subscriber side. As earnings growth resumes in upcoming quarters, the stock should move back towards its highs from earlier this year.

BB&T CORP. (BBT.N)
BBT is an American east coast, super regional, retail-oriented bank. It is most like TD in Canada. It will be a beneficiary of higher rates, and at 3 per cent yield and 13 times earnings, has an undemanding valuation. There are other acquisitions that they could make.
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
TRP Y Y Y
DIS Y Y Y
BBT Y Y Y

PAST PICKS: OCTOBER 28, 2016

MANULIFE FINANCIAL (MFC.TO)
Still own and like for Asian growth and exposure to rate hikes.

  • Then: $19.36
  • Now: $26.03
  • Return: 34.45%
  • Total return: 38.99%

ALGONQUIN POWER (AQN.TO)
Still own and like for safe growth and yield.

  • Then: $11.78
  • Now: $13.99
  • Return: 18.76%
  • Total return: 24.41%

CN RAIL (CNR.TO)
Still own and like for general North American economic growth.

  • Then: $84.45
  • Now: $103.46
  • Return: 22.51%
  • Total return: 24.53%

TOTAL RETURN AVERAGE: 29.31%
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
MFC Y Y Y
AQN Y Y Y
CNR Y Y Y


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