David Dietze, founder, president and chief investment strategist at Point View Wealth Management

Focus: U.S. equities
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MARKET OUTLOOK
There are a lot of reasons to be cautious as markets hit all-time highs. Frist, valuations are well above normal. The more you pay, the less your future returns. Indeed, 60 per cent of the market’s returns are due to just five stocks in a single, narrow sector: tech/Internet.

Second, much of the momentum for the eight-year bull market has been central bank largesse. But, that punch bowl is starting to be removed.

Third, while the job numbers and consumer confidence show economic strength, other indicators are not so rosy. Cars sales, GDP, consumer spending have not been so ebullient. Why is the 10-year Treasury yield well off its highs earlier in the year? Why are commodity prices like oil so sluggish?

On the other hand, with interest rates overall so low, investors will continue to search diligently for opportunities. And if most of the market’s leadership has been so narrow, there are opportunities among the market’s rank-and-file to make money!

TOP PICKS

EXXON MOBIL (XOM.N)
Having exposure to the super-major integrated energy companies in this environment makes the most sense. They have the balance sheets to withstand a prolonged downturn in the oil market. They also have access to capital to do acquisitions and pick up market share among distressed oil companies. XOM is the poster child for this story. The stock offers a 3.75 per cent dividend yield and should be a core holding in a portfolio.

PFIZER (PFE.N)
The bluest of the blue chip global drug companies, this company has the size and financial heft to develop new drugs and support the largest sales force in the world. Health-care companies have been pummeled recently due to concerns over price controls and excessive regulation. However, such initiatives have been tried before, only in retrospect to have presented wonderful buying opportunities. Pfizer is wonderful buy here, down over two per cent year-to-date in a market that’s up nine per cent, with the third highest dividend on the Dow (over four per cent), and is one of the cheapest Dow stocks, trading at less than 12 times 2018 projected earnings.

GOLDMAN SACHS (GS.N)
Financials are still cheap; it’s the only group that has not returned to levels seen pre-2008 downturn. This is a group that can actually benefit from an increase in interest rates, and that will clearly benefit from an improving economy

This is an opportune entry point as GS and financials have gotten off to a bad start in 2017, with Goldman down nearly nine per cent. GS still widely viewed as the top investment bank in the world.

Take advantage of some partisanship. GS is a big, bad institution that Hillary Clinton took money from, but bad taste may fade post-election. GS is the cheapest stock on the Dow; it should earn $19 this year, $20.87 next, so it’s trading at just 10.3 times 2018 earnings. Stock is down 14 per cent from its 52-week high of $218. Cost cutting always an option. More relocation to more profitable locations, like HK/China/India. Revaluation could also come from less reliance on trading/investment banking, more reliance an asset management (now 20 per cent of the business)/spread product (digital lending/buy of GE Cap deposits). Many competitors are being forced to restructure/exit banking, potentially giving GS additional opportunities.
 

PAST PICKS: MARCH 21, 2017

CHEVRON (CVX.N)

• Then: $108.04
• Now: $105.26
• Return: -2.57%
• TR: -1.56%

GLAXOSMITHKLINE (GSK.N)

• Then: $42.32
• Now: $43.70
• Return: 3.26%
• TR: 4.45%

AMERICAN INTERNATIONAL GROUP (AIG.N)

• Then: $61.76
• Now: $63.48
• Return: 2.78%
• TR: 2.78%

TOTAL RETURN AVERAGE: 1.89%
 

TWITTER: @dietzepointview
WEBSITE: www.ptview.com