COMMENT
Corporate profits need to lift this market. U.S. ones have had a strong YTD at over 20%. In 2019, they will increase 8%. That's positive if that happens. Markets will be higher a year from now, but the trade war is a serious overhang. Seeing car tariffs removed will certainly be positive. The detainment of the Huawei CFO is an obvious negative, so we must keep an eye on that. Executives are now hesitant to travel. Consensus is that Powell will raise U.S. interest rates next week and three times in 2019. But Powell has said factors could slow the economy and he'll be data-dependent. Now, the BOC has adopted a dovish tone. This means that interest rates in both countries will not rise as quickly as expected.
DON'T BUY
Brokerages are more volatile than banks or insurance companies, because they rely so much on capital markets. In the late-cycle, there's a lot of general uncertainty. If you want exposure to the U.S. financial sector, buy a bank of lifeco which are more stable.
DON'T BUY
A diversified industrial company across consumer, industrials and materials, but they have weak topline growth. About 18 months ago, they bought back stock, but added debt, when interest rates were low. Not her first choice in this space. Others have better top- and bottom-line growth.
DON'T BUY
Has copper, zinc and oil exposure. She's not buying resources, because of global uncertainty. China is a big buyer of these. TECK is good at paying down their debt, though. Wait to see how the tarriffs play out.
COMMENT
Pays a good 6% dividend. It's a long-term play. The box office accounts for 80% of their profits and have been diversifying into areas like the Rec Room--but this will take time. They sell tickets when the movies are popular. Steps like the VIP cinemas and serving alcohol are positive. The dividend should hold up, unless the movie business collapses, which she doesn't see. Don't see a dividend increase, though. Also, people watch movies during recessions.
BUY
REITs you recommend? Earlier this year, interest-sensitives moved down because interest rates were rising. Then, this fall, the Canadian economy looked shaky as oil fell, so rates held, and so THIS benfitted interest-sensitives. Now, there are fears of a recession (which she doesn't see), so investors bought these stocks again. You should hold 5-7% in REITS. She likes H&R REIT with a yield of 6%. It's diversified across commercial and industrial properties with some in Canada but got out of that in America. They'll benefit when Amazon builds another HQ in Long Island where HR has some residential property.
DON'T BUY
The CEO has made good moves, but he hasn't said how he'll grow their topline. Also a general pullback in U.S. tech means better stocks to buy elsewhere, stocks that boast better growth.
BUY
Still buying it during this pullback. Their online advertising, which they dominate, is still growing and they hold a lot of cash so that can finance their growth without taking on a lot of debt. Their self-driving division will launch sometime in 2019 and has good potential. Google is growing their topline by 22% for a few years, which she believes they can sustain.
DON'T BUY
Why is it so low? Canadian energy suffers from very negative sentiment, though the WCS spread has narrowed (which is good). CPG management is finally getting the point that investors don't want them to keep issuing equity. So, CPG is trying to do asset sales, but so are peers. Also, we're in tax-loss selling season. She owns very few energy producers.
BUY
The biggest U.S. mall owner. But they also own industrial and commercial. Diversified. They're good at re-purposing malls by including condos and gyms. The stock is cheap here. They've been buying back stock. She owns this through the Brookfield parent.
WATCH
A quality industrial and is on her watch list. General uncertainty, trade wars and their exposure to oil has held her back from buying. She owns other industrials, but all have come down in valuation. Wait to see how the trade war plays out before stepping into this sector.
PAST TOP PICK
(A Top Pick Dec 12/17, Down 0.2%) They operate in personal and beauty care, where margins are growing. This is a core consumer staple holding, because 60% of revenues come from emerging markets which offers more growth than in developed markets. This is a long-term secular play. Reasonably valued. A good defensive that pays over a 3% dividend.
PAST TOP PICK
(A Top Pick Dec 12/17, Down 8%) They did what they promised: completed $7 billion in asset sales, and de-levering their balance sheet, post-Spectra deal, and simplifying their corporate structure. They'll grow their dividend 10% annually to 2020. They have a backlog of projects to support this growth. Payout ratio is 60%. The stock is attractively priced now. Line 3 pipeline should come on in late-2019.
PAST TOP PICK
(A Top Pick Dec 12/17, Down 2%) Pays over 4% yield. It slipped because of rising interest rates. They built somer supply in Ontario and Quebec, so occupancy in Ontario has temporarily slipped to 88% vs. 91% 18 months ago. The demand is definitely there to absorb these new rooms. She likes the play on aging demographics, so there'll be a growing need for seniors housing. CSH is well-positioned to grow in Canada and is the leader.
COMMENT
The lifecos are attractive after this correction. Solid businesses. SLF has a big U.S. asset management operation. But she prefers (and owns) MFC which has a better valuation. In the past. SLF's earnings have outgrown MFC's, but MFC's should outpace SLF's going forward. MFC trades at a discount to SLF.