David Baskin, president of Baskin Wealth Management

Focus: North American large caps
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MARKET OUTLOOK
Most commentators have noted that the Trump administration has caused an unprecedented level of uncertainty about U.S. economic policy. While this is true, we expect that whatever policies do emerge will be primarily business friendly. Moreover, we are of the view that well-managed businesses will reward shareholders if purchased at reasonable prices, regardless of who’s running the American government. We believe that valuations for many stocks are stretched at this time, and we do expect a pullback in the 10 per cent to 20 per cent range sometime in 2017. However, we are not having difficulty finding good-quality companies trading at reasonable prices, and we remain fully invested.

TOP PICKS

DISNEY (DIS.N) – P/E: 17.5x | EV/EBITDA: 10.6x | Dividend yield: 1.5 per cent
Disney is a business that we’ve long admired. It has spent the last five to six years accumulating a portfolio of some of the most valuable properties in film and media, first with Pixar, then Marvel and Lucasfilm.

The key fear in the market about Disney has been the ESPN business, which represents nearly half of Disney’s revenue. The subscriber declines have been undeniable, and are almost certain to continue. However, ESPN should be able to make the transition to different mediums of viewership, and the investment in MLB Advanced Media last week shows that management is thinking about this issue deeply.

CVS HEALTH (CVS.N) – P/E: 13x | EV/EBITDA: 8x | Dividend yield: 2.45 per cent
CVS has been beaten down due to concerns over the role of PBMs within U.S. health care. We continue to think that PBMs play a valuable role in lowering drug costs in the U.S., and CVS is available at a very cheap valuation. CVS would also be one of the largest beneficiaries of a tax cut, as CVS pays one of the highest tax rates in the U.S. at nearly 40 per cent last year.  

CANADIAN APARTMENT PROPERTIES REIT (CAR_u.TO) – P/B: 1.05x | Distribution yield: four per cent | P/AFFO: 19x
Canadian Apartment Properties REIT is the largest landlord in Canada. We like apartments for income clients due to their stability. High home prices continue to force people to rent. CAR is planning to replicate its model in Europe, in English-speaking countries that have similar regulations to Canada. This involves recent acquisitions in the Netherlands and Ireland.
 

PAST PICKS: JANUARY 5, 2016

APPLE (AAPL.O)

• Then: $102.71
• Now: $135.34
• Return: +31.77%
• TR: +35.29%

H&R REIT (HR_u.TO)

• Then: $20.05
• Now: $23.19
• Return: +15.66%
• TR: +24.07%

PRICELINE GROUP (PCLN.O)

• Then: $1210.68
• Now: $1648.88
• Return: +36.19%
• TR: +36.19%

TOTAL RETURN AVERAGE: +31.85%
 

PERSONAL TWITTER: @DavidBaskinBWM
COMPANY WEBSITE: www.baskinwealth.com