Darren Sissons, vice president and partner at Campbell, Lee & Ross

Focus: Global equities and technology
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MARKET OUTLOOK

2017 was a good year for global investors. The Trump bump drove sizable gains for the large-cap pharma segment. Technology investors benefitted with semiconductors and FAANG stocks achieving strong returns. International oil substantially outperformed the Canadian oil patch due in no small part to our landlocked energy resources and the inability to bypass the oversupplied U.S. refining market. Logistics companies and rail performed well with the shipping segment in particular producing strong gains post the Hanjin Shipping bankruptcy. Financials both here and aboard had a strong year.

Looking into 2018, considerations now move towards picking next year’s winners. Financials should continue to perform in 2018, although investors are now increasingly weighing relative global valuations versus the expensive Canadian financial sector. Metals and mining had a decent run off the bottom in 2017 and more upside exists assuming the global recovery continues. Asian emerging markets, with the exception of technology and FAANG-like stocks, had a modest 2017. A continued European recovery and sustained U.S. growth will be positive for a broader group of emerging-market companies and commodity-producing nations. European industrials offer some value, as well.

Looking forward, some important investment themes to consider include:

  1. Can rich valuations be sustained by current global growth rates?
  2. Will the end of quantitative easing negatively affect the stock market?
  3. Rising interest rates: How will they increase the cost of company growth?
  4. Will immunotherapies provide more upside beyond what we have seen so far with Keytruda?
  5. Will DNA edit tools such as CRISPR create a new wave of drugs?
  6. Have oil prices bottomed, and are extremely discounted services companies now attractive?
  7. Are bitcoin and cryptocurrencies a glorified Ponzi scheme?
  8. What is the likely fallout from a deeper real estate correction?
  9. Where is inflation?

TOP PICKS

CN RAIL (CNR.TO) – Last purchased at C$103.55

  1. Well-managed Canadian national champion with exposure to the North American economy.
  2. A serial dividend raiser that increased its dividend at an annual average of 14.6 per cent for 15 years.
  3. Retired an average of 2.6 per cent of stock annually for 15 years.
  4. Benefits from both Canadian imports and exports.
  5. CNR periodically sells off excess real estate for a substantial gain.
  6. Attractive entry point for long-term dividend investors.

ROTORK PLC (RTOXY.PK) – Last purchased at GBP2.63

  1. A British manufacturer of actuators (on/off switches) for a range of industrial applications.
  2. An asset-lite business model that requires limited capital expenditures to grow.
  3. The dividend, currently yielding two per cent, has grown at an average of 7.3 per cent per annum in CAD for 15 years.
  4. Strong balance sheet and high return on equity metrics.
  5. Exposure to the recovering oil and gas markets.
  6. Historically, one of the fastest growing companies in the United Kingdom.
  7. Attractively priced for long-term investors.

WALT DISNEY (DIS.N) – Last purchased at US$111.13

  1. Dividend, currently yielding 1.5 per cent, has grown at an average of 12.8 per cent per annum for 15 years.
  2. A series of new content releases including the new ‘Star Wars’ movie.
  3. Management is actively focused on the ESPN challenges: made a number of moves including the launch of a Netflix-like offering and the acquisition of the content assets of Twenty-First Century Fox.
  4. The total return (dividends plus share appreciation) averages 12.3 per cent for 15-years.
     
DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
CNR Y Y Y
 RTOXY Y Y Y
DIS Y Y Y


PAST PICKS: JULY 7, 2017

INFOSYS (INFY.N)

  • Then: $15.04
  • Now: $16.00
  • Return: 6.38%
  • Total return: 7.81%

NESTLE (NSRGY.PK)

  • Then: 81.85 CHF
  • Now: 82.65 CHF
  • Return: 0.97%
  • Total return: 0.97%

SNC-LAVALIN (SNC.TO)

  • Then: $56.74
  • Now: $58.00
  • Return: 2.22%
  • Total return: 3.24%

TOTAL RETURN AVERAGE: 4%
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
INFY Y Y Y
NSRGY Y Y Y
SNC Y Y Y


PERSONAL TWITTER: @KiwiPMI
COMPANY WEBSITE: http://www.clrim.com/site/home