Fabrice Taylor, publisher of the President’s Club Investment Letter

Focus: North American equities
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MARKET OUTLOOK
It’s all about interest rates and despite some head fakes, they don’t seem to be going up much. That makes richly-valued stock prices more justifiable. Still, one needs to be cautious and find pockets of value by going where the herd isn’t but will soon be. If you can rotate sectors before the big investors do, you can still do very well. I believe the mining sector is poised for a big run.

TOP PICKS

HELIUS MEDICAL TECHNOLOGIES (HSM.TO)
I am rolling this pick over as we’re still waiting for the big news. I expect the company to announce the last patient enrolment in its traumatic brain injury study soon, which means we should get data from the study shortly after and then it should go to FDA for study. The company is planning a Nasdaq listing and that tends to be good for stocks with a good story to tell. Plus, the downside has been mitigated by evidence that the company’s device may be successful as a consumer product in the area of brain exercise and enhancement even without FDA approval. Last bought at $1.90.

RIO TINTO (RIO.N)
This is a big, diversified mining concern and cash cow. Although mining stocks have recovered somewhat from the cataclysm of 2011-16, they’re still cheap and, as is typical at this stage of the cycle, churning out cash flow. Rio’s ADR yields more than four per cent and that’s poised to rise as the company, like the industry, has cut growth capex. In fact, growth spending for the industry is flat, which means prices should firm up thanks to restrained production growth and rising demand from India and other developing countries. This should increase profitability and dividends. Last bought at $41.

TECK RESOURCES (TECKb.TO)
The stock has pulled back significantly from its recent high of $36 and now trades for less than 10 times earnings. If we’re heading for a bull market in mining as some analysts are saying, Teck is very cheap. The yield is almost insignificant but the company generated more than $800 million in free cash flow in the last quarter alone. That gives it a value-to-free-cash-flow ratio of about six times. Investors always come looking for cash flow. Last bought at $25.
 

PAST PICKS: APRIL 27, 2016

DIVERSIFIED ROYALTY CORP. (DIV.TO)

• Then: $2.30
• Now: $2.65
• Return: 15.21%
• TR: 27.13%

FITBIT (FIT.N)

• Then: $17.88
• Now: $5.37
• Return: -69.96%
• TR: -69.96%

HELIUS MEDICAL TECHNOLOGIES (HSM.TO)

• Then: $1.58
• Now: $2.07
• Return: 31.01%
• TR: 31.01%

TOTAL RETURN AVERAGE: -3.94%