Gordon Reid, president and CEO of Goodreid Investment Counsel

Focus: U.S. equities
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MARKET OUTLOOK
It’s ironic that in a $25-trillion public market that so little attention is paid to the primary support mechanism: Corporate earnings. After five quarters of earnings growth declines, ending in late 2016, the corporate profit train is again on the rails. First quarter earnings grew a solid 15 per cent year over year and 2017 is expected to achieve a 10 per cent+ outcome. Valuations stay reasonable if the fundamentals of a market keep pace with price, so pay as much attention to the “E” as the “P” in the P/E ratio.

TOP PICKS

CVS HEALTH (CVS.N) – Latest purchase June 2017 at $79
CVS has had a tough year, first losing sizable contracts to a rival and more recently being subjected to rumours that Amazon is going to invade the pharmacy space. It is building back business and with one billion prescriptions filled per year through almost 10,000 locations, it is a powerhouse. The complexity of a regulated business that does 99 per cent of its pharmaceutical sales with third-party payers creates a fairly wide competitive moat.

MASONITE (DOOR.N) – Latest purchase June 2017 at $76
Masonite is a leading worldwide manufacturer of interior and exterior doors, having last year achieved sales of 35 million doors in 65 countries. Margins and profitability ratios are steadily improving and business looks to be robust with household formation numbers steadily advancing.

PACWEST  BANCORP (PACW.O) – Latest purchase June 2017 at $49
PACW is a California-based bank with about 80 branches. It has grown through acquisition and primarily serves the commercial markets, both real estate and lending. With a four per cent dividend yield and attractive valuations on book value and earnings, this is an attractive entry point.
 

PAST PICKS: JUNE 15, 2016

TIME WARNER (TWX.N) – Sold on March 20, 2017 at $98.50

• Then: $72.88
• Now: $99.21
• Return: 36.12%
• TR: 38.54%

CITIGROUP (C.N)

• Then: $42.01
• Now: $63.88
• Return: 52.05%
• TR: 53.96%

TOLL BROTHERS (TOL.N)

• Then: $27.53
• Now: $39.03
• Return: 41.77%
• TR: 42.08%

TOTAL RETURN AVERAGE: 44.86%