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COMMENT
2019 should be a good year. Back-to-back negative years are rare. The average return following a down year is +17%. In 2015, we were down 8% then up 21% in 2016 for the TSX. Oil pricees have bottomed and should do well in 2019 which will benefit the TSX. Canadian financials look very attractive at current prices. These two sectors are poisted to do very well in 2019. Q4 dividend payers like Fortis and BCE were up 5% vs. Canadian banks -17%. Surprising given good earnings results in November 2018; banks were punished unfairly and are now bouncing back. U.S.: he expects currency headwinds and for the FAANGs to struggle in 2019 with negative Q4 earnings. He'd reduce his American positions.
PARTIAL SELL
Outperformed last year. Little growth here so not one of his favourites. Among stable utilities, he prefers Fortis and Emera--bigger with better reputations and dividend growth. Nothing wrong this this, but there are better stocks in this space. They had a good year in 2018, so take money here. Also the political picture in Albera looks murky (the Tories will likely replace the NDP), so coal-powered generation looks uncertain.
electrical utilities
COMMENT
Rotation from small-cap banks into large ones? He doesn't see a correlation. BMO itself was the highest flyer in 2018 until it got hit hard in Q4, and now it's back in the middle of the big 5 Canadian banks. He's been gradually selling off BMO (he owns 4 of the 5 banks). BMO is executing well in capital markets and the U.S., but its valuation in neutral.
banks
DON'T BUY
It got hit hard in the first half of 2018 over premium video on demand (shrinking shorter release windows of movies from cinemas to streaming/TV). It then got hit hard in Q4. This continues to be a show-me story. The Rec Room and gaming investments are still TBD in terms of how they affect the bottom line. He keeps passing on this stock; their future is too uncertain given Netflix and home viewing. 6.3% yield.
other services
PARTIAL SELL
They had a good year in 2018. It's been a great performer over a long time. They've been aggressively buying and have executed well. He owns Northland Power instead, which has slightly more upside and growth. Nothing wrong with AQN. You can take profits here and buy banks or oil/gas or other overly punished sectors.
electrical utilities
WATCH
He's watching it closely. Disclosure: A colleague of his sits on their board. A good business. CI can transition from mutual funds into private wealth management. They have a good cost structure. At $17, they're buying back lots of stock, but using debt to do so. They suffered a huge correction last year. But he's closely watching this as a serious buy. 4.1% dividend.
investment companies
funds
DON'T BUY
Yield of 7% which is not entirely safe. He's nervous about all Canadian oil dividends given CPG's cut today. WCP's management has been murky with its policies, so he's stayed away. To play an oil recovery, go to the majors instead like CNQ and Suncor with safer dividends. There could be a spike in oil companies if oil returns to $70. But there's better growth in the U.S. The Canadian oil space will continue to struggle. He prefers others like Vermillion that he owns.
Oil and Gas (Integrated Oils)
PAST TOP PICK
(A Top Pick Jan 04/18, Down 47%) He continues to support this even though 2018 was difficult for their investors. You must take the long view, and ALA has long-term assets, with over 66% of their assets being contracted utilities. ALA's U.S. acquisition will continue to grow. Utilities typically have weak Q3s because of weaker heating/cooling demand, but Q4 should be stronger. ALA needs to execute growth in northern BC with the new propane export terminal that'll come on in Q2; he expects growth here. Compare to Transcanada when they cut their dividend in 1998: their stock plunged from $30 to $10, then they increased their dividend 2.5x; and today shares are over $50. ALA can do the same with sharp execution. He continues to average down.
oil
gas
PAST TOP PICK
(A Top Pick Jan 04/18, Up 3%) They had a good 2018. Pays a solid 5% dividend and has good development projects in Taiwan and Korea. They brought on their big projects in Europe on time and on budget. They're now producing, so there's good cash flow to increase dividends and reinvest in the company. The end game could be as a tuck-in business for a larger infrastructure provider.
Utilities
HOLD
IPL vs. ALA? Had an unfairly rough 2018. Dividend increased. (ALA is a utility now whereas IPL is a midstream/pipeline.) They're building a big petrochem plant in Edmonton--a big unknown they're developing themselves. Good managers, but there's execution risk with that plant. He's resisted buying this, holding onto Enbridge instead. That said, you can hold IPL and that's fine. But keep it small in your portfolio.
oil pipelines
