Market Call for Friday, August 11, 2017
David Cockfield, managing director & portfolio manager at Northland Wealth Management
FOCUS: Canadian equities & exchange-traded funds
The TSX index is showing signs of a bottom. Hampered by worries about NAFTA, low energy prices and higher interest rates, the TSX has underperformed the S&P 500 since early November, and in 2016 by some 12 per cent. While U.S. equity markets appear fully priced in many sectors, Canadian equity markets seem more reasonably priced. There is the potential for U.S. equity markets to have a rest and see Canadian equities play catch up, as Canadian corporate earnings growth has been good and the recent economic expansion has been better than expected.
An e-commerce company based in Ottawa, the company allows merchants large and small to set up online websites. Merchants can accept online payment, manage marketing and mailing lists, inventory and accounting. This sector has huge potential, particularly for small vendors, as it provides the structures to compete with their larger competitors. Shopify has partnered with such large firms like Facebook, Amazon, Visa and Mastercard. This is a higher risk investment, still operating at a loss. However 2Q revenue is up 86.3 per cent. Last purchased in August at $117.09.
With offices in over 50 countries, SNC is a world-class engineering and construction company. With worldwide interest in improving infrastructure, the company has many opportunities for new business. The company has a wide range of services available for customers including engineering, procurement, construction, project management and financing. The company seems to have recovered from its bribery scandal with no restrictions likely on government contracts. The company has valuable assets such as its interest in the 407 toll highway in Toronto. The stock’s P/E is low and growth prospects continue to be excellent. Last purchased in May at $51.20.
BANK OF NOVA SCOTIA (BNS.TO)
The third largest Canadian chartered bank, with significant international exposure in the Caribbean, Central America, South America and Mexico. Recent earning reports showed excellent profit increases in these sectors, which continue to show better growth rates than North America. The stock provides a yield of 3.8 per cent plus a low P/E multiple of 12X. Last purchased in May at $76.05.
PAST PICKS: AUGUST 12, 2016
INTER PIPELINE (IPL.TO)
- Then: $27.28
- Now: $23.23
- Return: -14.84%
- Total return: -9.73%
BMO MSCI EUROPE HIGH-QUALITY HEDGED-TO-CAD INDEX ETF (ZEQ.TO)
- Then: $18.42
- Now: $19.50
- Return: 5.86%
- Total return: 8.00%
ISHARES S&P NORTH AMERICAN TECHNOLOGY SECTOR INDEX FUND ETF (IGM.US)
- Then: $120.12
- Now: $148.95
- Return: 24.00%
- Total return: 24.92%
TOTAL RETURN AVERAGE: 7.73%