Paul Harris.
Paul Harris is partner and portfolio manager at Avenue Investment Management. His focus is North American and global equities.
Top Picks:
Element Financial (EFN-TSX)
Element is one of North America's leading equipment finance companies within the four verticals of commercial & vendor finance, aviation finance, rail finance, and fleet management. The company has strong exposure to the U.S. after their PHH Corp acquisition last year (acquired their U.S. fleet leasing business) and are well positioned to benefit from the resurgence of the U.S. economy and growth in lease financing.
Trading at: 15.7x 2015 earnings, 11.8x 2016 earnings
Amgen Inc. (AMGN-Nasdaq)
Amgen is a U.S.-based biotech company with a core business of providing supportive care products to kidney disease and cancer patients. They have a strong pipeline of new drugs awaiting regulatory approval – the biggest being a cholesterol-lowering product with a potential release during the second part of the year – and also have a strong roster of legacy products that provide a market leading position. They are also pushing hard to cut costs significantly and improve their margins. Amgen has also reiterated their commitment to significantly increase their dividend over the coming years in an attempt to return cash to shareholders.
Trading at: 16.4x 2015 earnings, 14.6x 2016 earnings, Yield: 2.1%
Phoenix Energy Services (PHX-TSX)
Phoenix is an oilfield service company that provides horizontal and directional drilling technology and services to oil and natural gas producing companies with a focus in Canada and the United States. The company manufactures and sells drilling technology, drilling motors, and remote access directional drilling equipment. They are also in the process of developing new technologies that allow for real time drill analytics to flow back to their customers.
Trading at: 42x 2015 earnings, 14x 2016 earnings, Yield: 6.7%
Past Picks: March 26, 2014
Bank of America (BAC-NYSE)
Then: $17.18; Now: $16.07 -6.49%; Total return: -5.57%
Deere & Co. (DE-NYSE)
Then: $88.33 Now: $90.29 +2.23% TR: +4.94%
Target (TGT-NYSE)
Then: $59.20 Now: $79.36 +34.05% TR: +38.24%
Total return average: +12.54%
Market outlook:
The past few months have seen the return of some volatility to North American equity markets. The Bank of Canada surprised everyone with their interest cut in January and the effects of the collapse in crude prices are still working through the economy, with further fallout still likely. The U.S. economy continues to add jobs at its fastest pace in over a decade and the U.S. Federal Reserve is inching towards raising rates in the second half of this year. The divergence in monetary policies from different central banks across the world has also played an impact on financial markets over the past few months, which we have seen reverberate through FX markets. We see the impact of this with the U.S. dollar at multi-year highs. We expect at this late stage of the cycle for the Canadian stock market to underperform U.S. equities, especially on a currency adjusted basis. We still continue to see value in the Canadian equity market however, and our focus is on owning quality companies that have strong dividend yields, exposure to the U.S. economy, and are underappreciated by the market.