Ryan Modesto
Ryan Modesto is managing partner, 5i Research. His focus is Canadian small and mid-cap stocks.
Top Picks:
Great Canadian Gaming Corp. (GC-T)
GC-T is a casino operator that has some organic growth runway behind it with some renovations at a B.C. casino and a new casino expected to be completed in Belleville, Ont., in 2017. The company has a good operational history, and the valuation is attractive at these levels.
Stella Jones Inc. (SJ-T)
The company is in the business of railway ties and utility poles but is also moving into lumber, which should add a bit more growth than has been seen in the past. Shares have moved sideways over the last year and the fundamentals have caught up to the valuation. We think SJ offers a good entry point for long-term investors at these levels.
Spin Master Corp. (TOY-T)
This international toy company has a lot of growth levers that can be pulled between international growth, acquisitions, media content and re-launches of past hot products. The company has been delivering on quarterly results and is still run by the founders that built it to what it is today.
Past Picks: June 24, 2016
Airboss of America Corp. (BOS-T)
Then: 14.10 Now: 13.26 -5.96% Total return: -5.05%
Exco Technologies Ltd. (XTC-T)
Then: 12.20 Now: 12.10 -0.82% Total return: -0.24%
Premium Brands Holdings Corp. (PBH-T)
Then: 52.70 Now: 61.80 17.27% Total return: 18.79%
Total Return Average: +4.50%
Market outlook:
The same broad market themes have largely remained for the last six to nine months, which include:
- Will interest rates be raised?
- Trump or Clinton for President
- Are stocks expensive?
A rate increase in December is looking likely, but the Fed already appears to be talking down the pace of further increases (a lower-for-longer scenario). The outcome of the presidential race adds to the uncertainty, but we think it is unlikely to derail the American economy in any short order, especially if the recent Brexit events offer any insight into how markets may act. We would view these first two issues largely as short-term in nature and think investors may benefit from taking advantage of uncertainty and volatility over the next three months if it surfaces.
This leaves the question of valuations. Stocks are expensive on an absolute basis, but in a low-inflation and low-interest rate world where there are not many other viable investment options and real returns go a bit further, some sort of premium in stocks looks to be warranted. Looking at it more mathematically: If an investor required 7-per-cent nominal returns in the past when inflation was 3 per cent (4-per-cent real return), higher priced markets that offer only a 5-per-cent nominal return can very well still meet investor needs in a low-inflation environment of 1 per cent (4-per-cent real returns). Regardless, we continue to believe that investing and staying invested with a long-term mindset can be one of the greatest tools for individuals to reach financial independence.