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Market. Even with the indications from the Republicans that Canada is in the crosshairs for potential terrorists, he is not changing his portfolios, but is watching and listening closely. As a portfolio manager, it is riskier to speculate what a government will or will not do, compared to buying good businesses at the right price, and giving them the time that they need to appreciate and reflect back growth.

The low-priced leader, and is reflected in their numbers as margins are about half of their competitors. That model only works if there is high turnover and it is a margin game on each unit. The challenge is, there is no buffer to reduce prices should inventory stay on the shelves. They have done a great job at picking the right items to get them off the shelves quickly. About 25% of revenues comes from membership fees, and they have a 90% renewal rate. Their ability to grow is somewhat limited. This will always be expensive, so if you are a value investor, you would generally not go into this.

Canadian National (CNR-T) or Canadian Pacific (CP-T)? He likes both. Hunter Harrison leaving Canadian Pacific has somewhat neutralized it. On a valuation basis, you aren’t getting a bargain of one over the other. He would take a half position in both.

Canadian National (CNR-T) or Canadian Pacific (CP-T)? He likes both. Hunter Harrison leaving has somewhat neutralized this. On a valuation basis, you aren’t getting a bargain of one over the other. He would take a half position in both.

Merck (MRK-N) or Johnson & Johnson (JNJ-N) for safety? For safety, he would attribute that more to J&J. This one is a little more growth oriented. They are spending a lot on research and development and looking at growing their current product offerings. That’s great for a longer-term investor.

Merck (MRK-N) or Johnson & Johnson (JNJ-N) for safety? For safety, he would attribute that more to this company. They have a great yield of about 2.8%, but keep in mind that as a Canadian investor, you do not get the dividend tax credit. This company has the pharma, medical devices and consumer products. The bet you are making is that they are going to be able to turn around the recent acquisition of the devices business, and that is a big bet, because they spent a lot of money. Expects some share price volatility over the next 6-18 months.

As a conservative investor, smaller gold companies would tend not to make it into his portfolio. Gold and interest rates tend to have an inverse relationship. If you believe rates are going to increase, it generally puts downside pressure on gold.

8.6% dividend yield, which in the short term is safe for the time being. The flipside is, they should cut the dividend and use the cash flow to reinvest in the business to turn things around. They’ve done a great job in realigning their focus to kids and family, as opposed to some of the other brands they were operating under. If buying the stock, you are betting on the next leg up of their recovery from here. There are easier ways to make money out there.

Preferred shares? If talking about reset preferreds, the fixed resets, it is based off a five-year Government of Canada bond, and then there is an extra component that can vary anywhere between half a point to anywhere over 2%, which is based on the credit quality of the issuer. The lower the quality, the more of a premium they pay. Preferreds have really recovered over the last 12 months or so. You have to ask yourself what do the reset terms look like. The shorter it is, the more risk you face if anything funny happens with interest rates. His view is that the Canadian economy is struggling, and there is a meaningful probability that interest rates will be cut over the next 12-18 months. If that happened, the reset preferred market would be absolutely decimated. He would sell current holdings and reinvest into something that has a lower gain.

(A Top Pick Jan 11/16. Up 7.46%.) Sold a few months after he had picked it, and then bought it back later in the year. He likes its diversity between Canada and the US with the distribution and generation business. You are buying this for yield, not share price appreciation.

(A Top Pick Jan 11/16.) The markets in January were down, close to double digits. He went to 25% cash.

(A Top Pick Jan 11/16. Up 33.32%.) This company deals with sleep apnea by providing masks and devices. The opportunity on this is that they are very close to a refresh cycle with their masks, and there is some pent-up demand waiting for the new models to come out.

He is crazy about the US financial space. There is lots of upside. There is still regulation coming that will help the banks. Higher interest rates will help net interest margins. The US consumer is confident and is able to spend and borrow money. This bank tends to benefit from that. This is the most levered to the US consumer. You won’t go wrong with this, although the yield is awfully light at 1.2%. (See Top Picks.)

Gives the best dividend, but the cheapest valuation. However, when comparing to other Canadian banks, the others are much less Canadian banks than they where 3-5 years ago. That landscape has yet to change for this bank. The market is telling you that it is not willing to place the same multiple, given that it is very Canadian centric only. He feels the Canadian economy is going to struggle for 3-5 years.

Sell? He owns this and likes it, but less than he did a couple of years ago. Because they are essentially only in the wireless space, they are going to need to invest significantly in acquiring spectrum and upgrading networks. It’s a CapX heavy business, and there is not a whole lot of growth in it. A safe name to have in your portfolio, but if looking for some real growth over 3-5 years, you need to go to something like Alphabet (GOOGL-Q) or Amazon (AMZN-Q).