Darren Sissons, Partner & Vice President, Campbell, Lee & Ross

Focus: Global Equities & Technology Stocks

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MARKET OUTLOOK:

The markets are increasingly politicized: Trump in the south and his misguided America first crusade, Brexit and French elections in Europe, North Korean nuclear ambitions on the Korean peninsula and China’s growing economic and geopolitical influence across Asia and the rest of the world. Here at home, real estate markets are nervous given the Home Capital fallout and out west the bankruptcy of the Walton real estate empire isn’t helping. Against this backdrop U.S. markets are at multi-year highs with the NASDAQ leading the charge higher in 2017. Trump’s overseas cash repatriation agenda could be a game changer for large biotech, pharma and technology companies and for U.S. multinationals with sizable offshore cash reserves. Europe and Scandinavia in particular, appear to have turned the corner based on recent export and industrial production metrics. Asia remains the non-consensus call although a continuation of China’s improving export performance may change that view.

Looking forward, finding value at current prices has become increasingly difficult. Catalysts for higher share prices include higher interest rates for U.S. financials and low interest rates in Europe for companies tapping European bond markets. The pending Saudi Aramco IPO likely signals oil remains above $50 for the foreseeable future, which is good for energy and energy services companies. Infrastructure spending is accelerating across the globe and recovering U.S. and European consumers have an appetite for consumer discretionary spending. 

TOP PICKS 

Bank of America (BAC.N)

1. Rapidly growing dividend currently yielding 1.3 per cent.
2. Payout ratio at less than half its pre Global Financial Crisis peak so further dividend upside potential exists.
3. Balance sheet has improved dramatically since the 2009 crisis.
4. Leveraged to higher interest rates means higher profits at higher interest rates.
5. The wild card is the Trump government. It is looking to roll back punitive financial sector legislation implemented during the Obama Presidency. Should Trump successfully repeal Dodd Frank and portions of Basel III legislation profitability will rise substantially from current levels.

Disney (DIS.N)

1. Currently yields 1.4 per cent and has progressively grown its dividend by an average of 12.2 per cent per annum over 20 years.
2. Consistently buys back its stocks and has eliminated an average of 2.3 per cent of share outstanding per year for 10 years.
3. An attractive franchise of consumer discretionary offerings (film, TV, theme parks, tourism operations and merchandizing) that consistently ekes out growth.
4. While not on sale, investors with longer term horizons will be well rewarded by adding Disney to their portfolio.

Halliburton (HAL.N)

1. 1.6 per cent dividend yield.
2. An attractive entry point due to continued anemic capex spending by energy companies.
3. Delayed capex (new drilling and reservoir invigoration) has caused reservoir life of energy companies to fall precipitously. Exxon, BP and ENI have this year announced new enlarged capex plans and other energy majors will follow suit to head off reserve depletion.  

Past Picks:  JANUARY 27, 2017

Visa (V.N)

• Then: $83.77
• Now: $92.09
• Return: 9.93%
• TR: 10.13%

Novo Nordisk (NVO.N)

• Then: $35.78
• Now: $40.90
• Return: 14.30%
• TR: 16.62%

CSX Corp. (CSX.O)

• Then: $48.06
• Now: $52.50
• Return: 9.23%
• TR: 9.64%

Total Return Average: +12.13%

Personal Twitter Handle: @KiwiPMI

Company Website: http://www.clrim.com/site/home