5 Top Picks to Surf on the Short-Term Relief From Trade Tensions Rally — Weekly Top Picks
5 Top Picks to Trade this Week
This week investors have received the much-needed trade tensions relief for the short term. And strong economic activity news to break the negativity that is causing lot of volatility in the markets from the past several months. Solid earnings reports from companies for the second quarter adds to the positivity in the markets.
Fruitful meeting between Donald Trump and European Commission President Jean-Claude Juncker has stopped the U.S. President from levying tariffs on cars imported in to U.S. Both agreed to resolve the steel and aluminum tariffs imposed by U.S. and retaliatory duties levied by EU soon.
The GDP of U.S. economy grew by 4.1% in the second quarter of 2018, the strongest in more than three years. Further, inflation increased to 2.9% in June of 2018 from 2.8% in May. These economic results strengthen the Federal Reserve’s view to increase interest rates at a faster speed that it has been implementing from the past one year to contain inflation.
Amid strong economic environment and short-term relief from trade tensions, we present this week’s five top picks.
[nextpage title=”Top Pick #1 : Best in breed for ETFs”]
Wolfgang Klein, Senior investment advisor at Canaccord Genuity Wealth Management recommends BlackRock Inc. (BLK-N), “Best in breed for ETFs. Not cheap, but quality never goes out of fashion. It trades at 20 times earnings – good for the financial sector. It is taking initiative to dominate market share, while lowering fees. Yield 2.2%.”
Trade tensions seems to be a big concern for institutional investors, who have withdrawn $9 billion from BlackRock, Inc.’s (BLK) institutional funds. Is it trade tensions or professional investors being over cautious and piling up cash reserves must be seen in the coming quarters. BlackRock posted 11% increase in revenues and 26% increase in net income in Q2,2018 compared to Q2, 2017.
This is another excellent earnings quarter for the company driven by iShares ETFs, Long-term funds and Retail fund inflows.
[nextpage title=”Top Pick #2 : This bank recently acquired MD Financial”]
Bank of Nova Scotia
Rick Stuchberry, Portfolio manager at Wellington-Altus Private Wealth recommends Bank of Nova Scotia (BNS-T), “They’ve been punished more than their peers. They just acquired some top money managers and the street punished them. There’ll be a write-off this quarter, but long-term these additions will benefit BNS. Pays a great dividend and should be enough growth to perform well. Well-managed. “
The acquisition of MD Financial Management is an excellent value addition to the growth prospects of Bank of Nova Scotia. MD Financial Management provides investment management and financial planning services to physicians and their families in Canada. Access to this High Net Worth Individuals (HNWI) segment allows the bank to cross sell its banking products and services to the physicians.
Further, Scotiabank and Canadian Medical Association has entered into an agreement, that allows Bank of Nova Scotia to act as a preferred provider of financial products and services to physicians and their families in Canada.
[nextpage title=”Top Pick #3 : A company looking to expand internationally”]
Restaurant Brand International
Stan Wong, Director & Portfolio Manager at Private Wealth Management recommends Restaurant Brands International (QSR-T), “Great ROE. They’re improving brand awareness, guest experience and ordering online, like Tim Horton’s coffee. Also, they’re looking to expand internationally. They’re trying to make domestic franchisees happier. It pays 2.9% dividend yield. 23x forward earnings with a 15% growth rate.”
Restaurant Brands International has witnessed impressive earnings result in Q1, 2018. With the company expanding its three restaurant brands Burger King (1100+ new restaurants opened), Tim Hortons (130) and Popeyes (183).
Tim Hortons has plans to open 1500 locations in China in the next ten years. Both Burger King and Popeyes are experimenting with delivery services in select U.S. locations with promising results.
[nextpage title=”Top Pick #4 : A play on the US housing market”]
First American Corp.
Kash Pashootan, Sr.VP & Portfolio Manager at First Avenue Advisory recommends First American Corp. (FAF-N), “This is a play on the US housing market. They sell home title insurance. The stock has fallen by 12% recently on interest rate increase concerns.
He thinks this fear is over blown as real estate pricing is well below 2008 peaks. It is trading at 11 times earnings. Yield 3%.”
Recent interest rate hikes and accelerated rise expectations in U.S. caused severe plunge in share price of First American Corp. However, strong labor market, tax reduction and ultra-low real estate pricing should keep the US housing market growth prospects intact in the coming quarters.
[nextpage title=”Top Pick #5 : A growth utility”]
Algonquin Power Utilities Corp.
Bruce Campbell, President at Campbell and Lee InvMngmnt recommends Algonquin Power & Utilities Corp (AQN-T), “It’s a growth utility. It offers decent yield, but also 8-10% yearly growth. He thinks AQN will be serial raisers of their dividend.
It’s pulled back like all utilities, so under the current $13 is a good entry point. He expects a price rise to $14 plus the dividend.”
Algonquin Power & Utilities Corp announced its plans expand its regulated and unregulated operations by investing $6.4 billion. As part of its global expansion the company bought 41.5% stake in Atlantica Yield (AY).
It has posted excellent revenue and earnings growth in the past twelve months. Its expansion initiatives should position it in a much better growth stand point in the coming quarters.