Stock picks for riding the new bull market

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Freaky Friday, or something more?

Friday's stunner of a U.S. jobs report has provided a strong hint that the livin' won't be easy for investors this summer. The measly 38,000 net new jobs created last month was the smallest gain since September of 2010 and the finer details of the report were pretty awful as well.

It didn't put economists in a shining light: all 105 of them surveyed by Reuters had expected a higher number – most of them much higher. Markets quickly lost confidence that the Fed is soon going to pull the trigger on higher rates. The U.S. dollar, insurers and bond yields sunk.

But gold glittered and Barrick posted double-digit gains – enough to send the TSX higher to reclaim the bull market crown. Now up for four weeks in a row, it has gained 20 per cent from its Jan. 20 low.

For investors the message is clear: Don't pull out the barbecue and kick back for the warm weather months just yet. The economy may very well have more surprises in store. This is going to be a bull that's difficult to ride.

Three big numbers to note

Zero: The number of technically attractive, oversold TSX stocks, based on having a relative strength index below 30 as of Thursday's close

4%: Probability of a June 15 interest rate hike in the U.S., as implied by futures trading. This is down from 22 per cent prior to Friday's jobs data.

27%: Probability of a July 27 Fed rate hike, as implied by futures trading. This is down from 54.8 per cent.

Stock picks from the Street

Vermilion Energy Inc. This $4.9-billion market cap energy explorer and producer has cut costs and kept its balance sheet strong amid the dive in oil prices. If you're confident oil has bottomed, this is a potential stock to add to your portfolio, says Gordon Pape.

Fiera Capital Corp. Equity funds are facing the challenge of slowing sales and declining earnings. But Fiera, the country's third-largest independent and publicly traded asset manager, is bucking the trend. It offers shareholders a combination of growth and income, says Jennifer Dowty.

Civista Bank. This Ohio-based financial services company, a subsidiary of holding company Civista Bancshares Inc., takes deposits from rural Ohio and deploys it in cities with a more vibrant economy. And that business model is working well, says the Contra Guys. The stock has been rising, although it could get more attention if it boosted its dividend.

Brookfield Renewable Partners LP. It's a win-win if you can do good for the planet and your portfolio at the same time, says John Heinzl. One of the world's largest publicly traded renewable power producers, the stock has been generating some electrifying returns for investors. For the five years ended May 30, the units posted a total annualized return – assuming all distributions had been reinvested – of 16.6 per cent, far outpacing the S&P/TSX composite's total annualized return of about 3.4 per cent over the same period.

Etsy Inc. As mutual fund managers hunt for where consumers are spending the bucks, they're leaving the mall. Instead they're looking at more niche retailers such as Duluth Holdings Inc., Etsy Inc. and QVC-shopping network parent Liberty Interactive Corp. All of them are outperforming the usual retail giants as well as the S&P 500.

The Rundown

This shooting star doesn't make your wishes come true

There is a technical analysis term called the shooting star, and our in-house equity analyst Jennifer Dowty explains why it may be time to sell if this bearish signal shows up in the chart of a stock you own.

Portfolios to follow from our Strategy Lab experts

Our Strategy Lab investors have updated their portfolios. Check out what stocks John Heinzl, Norman Rothery, Andrew Hallam, and Chris Umiastowski have decided to buy.

Dividend ETFs that show something unexpected

Some dividend ETFs hold surprises, says Rob Carrick, such as distributions, dividends and yields that vary more than you'd expect. And the return from Canadian dividend ETFs have been lame over the past 12 months. Check out Carrick's 6th and final ETF Buyer's Guide on Saturday, looking at U.S. and International Dividend and Income ETFs.

Software company or energy services provider?

Computer Modelling Group Ltd., a Calgary company that is a leader in "reservoir simulation" software, has been one of Canada's most successful software companies. But since nearly all its sales come from the beleaguered oil and gas industry, its stock has taken a hit, says David Milstead. And now it looks expensive compared with other software companies out there.

Ups and downs in the industrial sector

Industrial stocks were the high fliers over the winter, but now have sunk, reports Bloomberg. Short sellers have taken over and that's driving down prices amid a looming interest-rate hike, a stronger greenback and data that show manufacturers are facing sluggish growth.

RBC weights in

RBC released its focus list of best Canadian investment ideas for the quarter beginning June 1, which could find the environment for financial stocks continuing to improve. The report chose Toronto-Dominion Bank as the top financial pick, but RBC's portfolio advisory group reduced its preference for Canadian consumer stocks, writes Tim Shufelt.

Big global bank a fan of the TSX

Canadian stocks look poised to extend this year's winning streak, according to Credit Suisse, which has also outlined some of its top picks.

The overbought and oversold

Actually, there are only overbought stocks on the TSX right now, says Scott Barlow, who takes a fresh look at the latest readings for the Relative Strength Index. The index itself is getting close to a sell signal.

Ask Globe Investor

The Question: If one holds XAW -- the iShares Core MSCI All Country World ex-Canada Index ETF -- in a tax-free savings account, will the distribution be subject to withholding tax? Is it recoverable?

The Answer: The short answer is that, yes, there would be withholding tax. And no, it would not be recoverable. However, withholding taxes should not be the only factor you consider when deciding whether to purchase a particular exchange-traded fund in a certain account. The total amount of tax you would pay in a TFSA would still be lower than if the units were held in a non-registered account. A thorough discussion of foreign withholding taxes - and how they are affected by the particular ETF and account type - can be found on PWL Capital's website at https://goo.gl/HP8nom. I recommend that ETF investors bookmark PWL's paper for future reference as it covers just about every possible scenario. -John Heinzl

Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.

What's up in the days ahead:

Sizzling temperatures are in the forecast for this summer across much of the heavily populated regions of North American. That means the air conditioners will be humming and natural gas will be in high demand. Jennifer Dowty will profile a Canadian stock she thinks will make for an excellent play. And Norman Rothery explains why it's worth giving equally-weighted portfolios a second thought instead of all those index funds that simply use market-weight capitalizations.

Next Friday will be the Canadian jobs report. Good luck in predicting those notoriously volatile numbers -- especially with the added uncertainly of how the Fort McMurray fire will factor in. For the complete rundown of the economic numbers and earnings ahead, check out our handy dandy calendar here.

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Compiled by Gillian Livingston