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Acacia Mining is trying to repair relations with Tanzania, where it owns three mines, including the Buzwagi mine, seen above.</caption>Brookes

The 'picks and shovels' investment strategy is a reference to the 19th century gold mining booms in North America. In a gold rush, the smartest financial move is not to buy up land in the hopes of finding gold, it's opening a store selling picks and shovels so that others can fruitlessly dig holes in the ground.

Investing in picks and shovels during a gold rush is an example of a 'peripheral play,' a company not directly involved in a trend but benefiting from it. American Tower Corp., a company that makes towers for mobile phone networks, is a good recent example. American Tower stock went from $17 (U.S.) in 1998 to $107 now without ever building a cell phone, or caring who did.

Health care and cloud computing are my two current favourite growth sectors and I've been actively looking for related peripheral plays. Thermo-Fisher Scientific Inc., providers of health care laboratory and diagnostic equipment, is a strong candidate, and Stryker Corp., which offers complete systems and equipment for hip and knee replacements is another. Quest Diagnostics Inc. is also worth further study.

In cloud computing, Amazon.com, VMWare Inc., Microsoft Corp. and Salesforce.com are the 800-pound gorillas, the equivalent of the first few gold miners who got there early and struck it rich in the Yukon. Peripheral plays with anything close to reasonable valuations are, unfortunately, hard to find.

In 2016, I successfully traded F5 Networks Inc. (in hindsight I never should have sold it), but most of the cloud-related companies I'm looking at now have price-to-earnings ratios best described as insane. Software developer PTC Corp., for instance, has terrific recent performance and is highly touted by RBC research, but its trailing PE ratio is just under 7,000 times (that's not a typo).  Hubscore Inc., which designs marketing-based software using the cloud, is also growing revenue quickly but didn't generate profits in 2016.

I will keep looking for peripheral plays because it's one of my favourite ways to invest. If the right company can be found, they allow investors to benefit from the strongest secular growth trends with far less valuation risk.

--Scott Barlow

Stocks to ponder

Intertape Polymer Group Inc. The stock may soon find downside support given its reasonable valuation, writes Jennifer Dowty. In addition, the company offers investors an attractive dividend yield of 3.2 per cent with a dividend paid in U.S. dollars. Intertape develops and manufactures products, such as carton sealing tapes and industrial and specialty tapes and fabrics, used in industrial, automotive, and aerospace applications. The consensus one-year target price is $27.63, suggesting a potential price return of 19 per cent over the next 12 months. If you include the dividend, the potential total return forecast is approximately 22 per cent.

Canadian Tire Inc. This retailer may not have the customer service of Home Depot or the impulse-purchase appeal of Costco, but its convenient locations and broad selection of sporting goods, automotive products and household items have helped it carve out an enduring niche in Canadian retail, writes John Heinzl. And that, in turn, has made the stock a great investment. Over the past five years, shares of the Toronto-based company have posted a compound annual price return of 16.8 per cent. Including dividends – and assuming they were reinvested in additional shares – the total annual return was a scorching 23.2 per cent, crushing the S&P/TSX composite index's 8-per-cent total return over the same period.

Waste Connections Inc.  This stock is on the cusp of appearing on the positive breakouts list, writes Jennifer Dowty. This stock is delivering revenue growth and has 15 'buy' calls by analysts. It will report results on Feb. 21. Its dividend is 72 cents per share a year, which equates to an annualized dividend yield of about 1 per cent. The consensus one-year target price is $88.79 (U.S.), suggesting a modest single-digit potential price return over the next 12 months.

Dollarama Inc. Dollarama stores appeal to bargain hunters; the stock does not, writes David Berman. Since the Montreal-based retailer went public in 2009, the share price has risen more than seven-fold, making it one of the best performers on the S&P/TSX composite index over the past eight years. Over the past five months, though, the stock has been drifting sideways, marking a rare pause for a high-performance stock. Are investors becoming price sensitive as the company approaches the limit of its growth in Canada?

Yellow Pages Ltd. Just a quarter ago, Yellow Pages Ltd. was quick to emphasize its "Return To Growth" business plan, citing it in the second paragraph of its earnings release, about 40 words in. This week, as the company reported its disappointing year-end results, "return to growth" didn't appear until about 1,700 words in to the news announcement, writes David Milstead. Appropriate, as Yellow Pages closed the books on 2016 with lower levels of revenue, compared to the prior year, in three of the four quarters. But the company's problems transcend just these top-line problems; indeed, investors, who whacked the shares down to a 52-week low Wednesday, are concerned, with good reason, that we are seeing a Return to Decline at the company.

Sun Life Financial Inc. This stock just surfaced on the negative breakouts list with the share price tumbling 5 per cent on Thursday, writes Jennifer Dowty. The price weakness may represent a potential future buying opportunity for longer-term investors. After the market closed on Feb. 15, the company reported lower-than-expected fourth quarter results. Underlying earnings per share (EPS) came in at 91 cents, below the Street's forecast of 97 cents. The earnings miss sent the share price plummeting 5.1 per cent the following day. This earnings miss translates into a potential buying opportunity.

Genworth MI Canada Inc. This stock is the best performing stock in the S&P/TSX composite financial sector index in the year to date, writes Jennifer Dowty. The stock has experienced strong price momentum, rising over 10 per cent so far this year. From a technical perspective, the stock chart for Genworth looks interesting. The share price recently exhibited a bullish "golden cross" pattern as well as a positive "inverse head and shoulders" pattern.

The Rundown

'Soak the rich' federal budget could be coming soon, says Rosenberg

Gluskin Sheff + Associates chief economist David Rosenberg says he has been hearing whispers that the federal Liberals will table a "soak the rich" budget in the weeks ahead – one that includes a steep hike in the tax rate on capital gains, writes Josh O'Kane. Mr. Rosenberg said in his morning note that the capital-gains inclusion rate could rise to 75 per cent from the current 50 per cent, which has been the rate since 2000. Returning the rate to that level, combined with the most recent uptick in the top marginal personal income tax rate, would mean that Ontario investors would pay as much as 40 per cent tax on capital gains.

What to watch for in the coming federal budget

Will there come a day again when taxpayers have something to look forward to in the annual budget? Perhaps. As we near the 2017 federal budget (at the time of writing, the date has yet to be announced), Tim Cestnick wrote a column sharing what he thinks could be the key themes and potential changes. Some of these ideas come from a review of the report of the Standing Committee on Finance (SCOF) and its recommendations to the Finance Minister for this budget.

Are we on the verge of a stock market crash? It's complicated

Popular metrics of market valuation – such as price to forward earnings, price to book value, price to cash flow and cyclically adjusted price to earnings (CAPE) – indicate the U.S. stock market is overvalued by between 10 per cent and 60 per cent. With so many indicators flashing red, what is the likelihood that the stock market may crash? Normally, it is difficult to determine whether a bubble exists until it is too late. But even if we know we are in a bubble, it is difficult to foresee when it will burst, writes George Athanassakos. He takes a look at a recent study on the topic of bubbles and crashes.

As growth plans return at gold miners, are investors being set up for disappointment?

Canada's leading gold companies are once again turning their attention to new projects, as resilient bullion prices and healthier balance sheets fuel guarded optimism, writes Ian McGugan. The shift in emphasis was clear as senior executives discussed earnings reports with analysts on Thursday. A year ago the talk was all about cutting costs, selling assets and expanding free cash flow, but miners are now stressing growth opportunities too. The renewed interest in growth might remind nervous investors of the debacle a decade ago when gold miners spent so lavishly on acquisitions and mine development that most failed to generate any lasting returns for shareholders.

Here's a tempting play for dividend investors amid spiking bond yields

Record speculative short positions on U.S. Treasuries, combined with increasing foreign government selling of U.S. bonds, create an interesting combination of short-term risk and mid-term opportunity for Canadian income and dividend investors, writes Scott Barlow.

Projecting the best investment returns over the next seven years

Think about this very carefully. If you had to decide now where to invest your money to earn the best return with the lowest risk over the next seven years, where would it be? Many people would say the U.S. stock market. They would be wrong, according to a new analytical tool published this month by the asset allocation team of Mackenzie Financial, writes Gordon Pape. You are likely to earn a much better return by investing in the stock markets of Britain, Canada and Australia than by focusing on Wall Street. U.S. stocks are overpriced right now, as are those of Japan. By contrast, Europe, Canada and Australia are undervalued.

Mexican sell-off seen as a buying opportunity

Up until Nov. 8, Mexican stocks were having a pretty good 2016, writes Tim Shufelt. Considering how frequently Donald Trump blamed Mexico for American problems, real and imagined, his victory in the presidential election put a swift end to a solid rally in Mexican equities. By the end of the following week, the main Mexican benchmark had fallen by 8.5 per cent, or 17.6 per cent in U.S. dollar terms, factoring in the plunge in the peso. For emerging markets' value investors, this provided a rare opportunity to buy up cheaper Mexican stocks.

14 companies with recent insider buying and selling activity

Industry leaders are under accumulation by insiders, writes Jennifer Dowty. Of the eight stocks purchased in recent days by insiders, five of the companies are members of the S&P/TSX 60 Index. In contrast, only one stock from the S&P/TSX 60 Index experienced notable selling action by insiders.

The week's most oversold and overbought stocks on the TSX

The S&P/TSX Composite climbed 1.6 per cent for the trading week ending with Thursday's close. The domestic benchmark is now officially overbought and technically vulnerable to a temporary correction according to Relative Strength Index (RSI). The current RSI reading of 71 is above the sell signal of 70, writes Scott Barlow.

This investor has focused on creating an income-generating portfolio

After Richard Morrison and his wife lost their jobs, they created an income-generating portfolio in their taxable account made up of high-yielding preferred shares and the BMO High Dividend Covered Call ETF. This increased their income for living expenses, writes Larry MacDonald in the latest Me and My Money column.

Seven questions to ask yourself if you're considering an annuity

An annuity is a big decision. Take your time, think it through and remember that the best choice address both your financial and emotional concerns, writes Rob Carrick. He looks at a case where a woman has a large RRSP in blue-chip dividend stocks and whether it makes sense to put half of her portfolio into an annuity when she converts it to an RRIF. Here are seven questions to think about first.


Interesting Links

Of pessimism and pride -- a look a the perpetually pessimistic market prognosticators.

Research Reports

Chart Watch: Bull market trying to extend its breakout

Number Crunchers

Eight stocks with year-to-date price momentum greater than S&P 500, Dow indexes

Fifteen lesser-known TSX stocks with quality growth potential

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What's up in the days ahead

This weekend in Globe Investor, David Berman will look at the outlook for timber stocks amid all the tough trade talk coming out of Washington, Norman Rothery has some sobering words about investment returns at a time when Ottawa may be considering a steep hike in the tax rate of capital gains, and Ian McGugan takes an indepth look at Northern Dynasty amid a short seller's claim against the company.

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Compiled by Gillian Livingston

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