Mike Newton, Director, Wealth Management & Portfolio Manager, Scotia Wealth Management
Focus: North American Large Caps & ETFs
The aftermath of Brexit, along with the highly contentious presidential election, are likely to bring continued bouts of volatility and uncertainty. This uncertainty and pessimism of investors represents the most compelling support for stock prices longer term in terms of sentiment. I am definitely all cognizant of the multitude of market headwinds; however I see a series of positives.
- Investors have considerable stockpiles of cash to purchase stocks.
- Short positions are still high.
- Investors will chase short-term rallies, but do not trust them beyond a few months.
- High bond prices and historical low and negative yields are confusing investors solidifying the “wall of worry.”
- Markets seem to be successfully trudging through geopolitical quicksand underscoring its resilience.
- Likelihood of continued accommodative Central Bank environment will support bullish conditions.
Dentsply Sirona (XRAY.O), Most recent purchase June 27th at US$59.40
The name might not be familiar, but the company’s products are ubiquitous. Your dentist likely uses their products. The company designs, develops, manufactures, and markets various consumable dental products for the professional dental market.
The dental products industry continues to experience consolidation with respect to both product manufacturing and distribution, although it continues to be fragmented, creating a number of acquisition opportunities. Dentsply made more than 20 acquisitions in the past five years. I have a positive view of XRAY's capital return program with a strong share repurchase program and recently increased dividend.
Vantiv (VNTV.N), Most recent purchase June 27th at US$52.61
A leading payment processor operating in the background. Results have been strong as of late thanks in part to the ongoing transition to new chip-enabled credit and debit cards. Merchants are being forced to accept the cards as part of the so-called EMV standard that aims to better secure retail transactions. Banks and merchants—both sides of the credit- and debit-card equation—increasingly rely on Vantiv to keep transactions secure.
Future growth is fuelled by the company’s fast-growing channels (e-commerce, integrated payments, and merchant bank), which target the attractive small to medium-sized merchant segment and are expected to account for ~40 per cent of total company net revenue in 2016.
In addition, Vantiv is well-positioned to capitalize on secular changes in the merchant acquiring industry, such as the integration and implementation of omni-channel payment services for retailers of all sizes.
TransDigm Group (TDG.N), Most recent purchase June 27th at US$252.28
TransDigm Group is a leading supplier of engineered components and systems for the aircraft industry. The company has industry-leading margins and also one of the highest exposures to the recovery in the aerospace aftermarket.
TransDigm also has a strong record of making bolt-on accretive acquisitions, or returning capital to shareholders when no attractive acquisitions exist. The company's products are almost all sole-sourced and proprietary in nature, which creates high barriers to entry for competitors. In addition, Transdigm generates over 70 per cent of its earnings from the commercial aftermarket. A great annuity.
Past Picks: July 3, 2015
iShares Trust Dow Jones U.S. Healthcare Sector ETF (IYH)
- Then: $159.49
- Now: $152.86
- Return: -4.16%
- TR: -2.08%
Constellation Brands (STZ.N)
- Then: $117.09
- Now: $164.01
- Return: +40.07%
- TR: +41.42%
Alimentation Couche-Tard (ATDb.TO)
- Then: $53.80
- Now: $58.93
- Return: +9.54%
- TR: +10.14%
Total Return Average: +16.49%