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COMMENT
Market Outlook. Looking back one year, that's when the TSX peaked, right before the March sell-off. The markets have decided to give a pass for 2020. Central banks have eased dramatically and interest rates are near zeros. Markets are reflecting the thinking that things will continue to improve this year.
COMMENT
S&P 500 companies' earnings season for the fourth quarter is nearly over and they have surprised on the upside. Q4 earnings were 4% higher than the previous year. Companies are starting to be more comfortable giving guidance. Demand is coming back in areas that have start reopening. The earnings need to continue to come in to support the market as these highs.
COMMENT
Rising bond yields. The market was a bit nervous this week, but the US 10-year bond yields are below what they were a year ago. Real interest rates are still negative. When the 10-year bond yields get to 3-3.5%, that's when you start to get a little nervous. Inflation needs to be watched. Feds have committed to low interest rates for the near future. If inflation gets up to 2-2.5% for a sustained period, markets can see more volatility.
BUY
Very attractively valued right now. Pipeline stocks have been stuck in the same corner as the energy producers when commodity prices collapsed. Infrastructure stocks have since recovered. Dividend is safe, yielding over 7%. Longer term growth may be affected if producers do not grow production. However, the capital projects will insure increasing cashflow for the foreseeable future. Intends to increase dividend with cashflow growth.
oil
gas pipelines
BUY ON WEAKNESS
Continues to own this. Buys more in the $270 range for clients. Likes the company and its potential to benefit from increasing housing demand. Interest rates are still low and housing stock is aging in the US. There is a need for renovations. Over the longterm, you can start accumulating.
specialty stores
BUY
Continues to buy for new clients. Very attractively priced here. Defensive with regulated cashflow. Increasing their dividends 6% annually through 2025. Bond yields are still very low so she is not concerned. The market has focused on cyclical recovery plays and neglected defensive stocks. A good time to buy when it is out of favour for steady dividends.
electrical utilities
PAST TOP PICK
(A Top Pick Feb 13/20, Down 4%) Still likes it and holds it for client portfolios. Continues to buy at these levels. Covid impacted the consulting side. They are starting to see more bookings recently. Companies need to digitize and increase cybersecurity, services CGI offers. Strong balance sheet and well-positioned for acquisitions.
consulting
PAST TOP PICK
(A Top Pick Feb 13/20, Up 31%) Cruise lines and theme parks have been a drag, but they pivoted quickly to their direct to consumer streaming service. They boosted their subscription target recently. It is also a covid recovery play for when the theme parks and cruise lines come back. The franchise value is still very high. Would not add new money, wait for a pullback.
entertainment services
PAST TOP PICK
(A Top Pick Feb 13/20, Down 16%) They spun off Otis and Carrier, and merged with Raytheon. It is now half defence and half aerospace. The defence side has been doing well. Continues to hold it, and is a play for the recovery in the airline industry. Great management team. Earnings are depressed, but it will pick up with reopening.
mngmnt
diversified
COMMENT
U.S. 10 year yield. The US yield is 1.3%, and 1.1% in Canada. Very low interest rates. When interest rates start to go up in terms of the yield curve, it is a good thing since it means the growth outlook is improving. Cyclical stocks are doing better because of this. We must evaluate the discount on future earnings with higher interest rates for growth names and this is what is hampering their performance right now.
