Robert McWhirter, president, Selective Asset Management

Focus: Canadian dividend and growth stocks

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MARKET OUTLOOK:

U.S. equity prices appear overvalued as the Shiller cyclically-adjusted price-to-earnings (P/E) ratio of 28x is 70 per cent higher than its long-term average. In addition, Hussman Strategic Advisors recently noted that the median price-to-sales ratio of the S&P 500 companies of 2.4x is almost double its long-term average.

However, global economic activity continues to improve. 26 of the 30 Global Purchasing Manager’s Indexes (PMI) are now over 50 (indicating growth) and the global PMI was at 52.7 in January. The rising price of both WTI oil and copper appear to be confirming this global economic growth. From a technical analysis perspective oil appears headed to US$75 in the next year.

Rising interest rates are an important factor for stock prices. Goldman  Sachs’ private wealth management group recently noted that over time stock prices rise with rising bond yields until the U.S. 10-year Treasury hits 3.9 per cent, about 60 per cent above  today’s 2.4-per-cent yield.

Since December defensive themes have performed well. This looks likely to continue, as technical analysis indicators suggest U.S. 10-year bond yields appear to be headed lower.

We believe stocks will continue to do well over the balance of the year.

TOP PICKS:

FORTIS (FTS.TO) 

A diversified, international distribution utility holding company with a $17.3 billion market cap. 

NEW FLYER INDUSTRIES (NFI.TO)

The largest transit bus and motor coach manufacturer and parts  distributor in North America with fabrication, manufacturing, distribution and service centers in Canada and the United States, with a $2.7  billion market cap.

WESTERN FOREST PRODUCTS (WEF.TO)

Endeavors in timber harvesting, reforestation, sawmilling logs into lumber and wood chips, and value-added remanufacturing, with a $0.84  billion market cap. 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
FTS N N Y
NFI Y Y Y
WEF N N N

 

PAST PICKS: FEBRUARY 8, 2016

AGNICO EAGLE MINES (AEM.TO)

  • Then: $47.24
  • Now: $60.71
  • Return: +28.51%
  • TR: +29.61%

BORALEX (BLX.TO)

  • Then: $15.19
  • Now: $20.45
  • Return: +34.63%
  • TR: +38.90%

SAPUTO (SAP.TO)

  • Then: $37.04
  • Now: $46.26
  • Return: +24.89%              
  • TR: +26.61%

TOTAL RETURN AVERAGE: +31.71%

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
AEM  N N N
BLX N N N
SAP Y Y

Y

WEBSITE: selectiveasset.com