Hap Sneddon is chief portfolio manager and founder, CastleMoore Inc. His focus is technical analysis & macro portfolio strategy.
Top Picks:
Aecon (ARE.TO)
Last purchased on August 13, 2015 at $11.57
The company recently printed a significant earnings beat (mostly due to industrial operations in Ontario), revealed a growing order backlog, raised its positive outlook and increased its dividend 15 per cent. Technically, the stock broke out of a recent range near $16. It may come back into the range between $13-$16 before moving higher to the technical target of $21.
Coca-Cola (KO.N)
Last purchased on February 22, 2016 at $43.95
The world's largest beverage company has strong brand-driven assets and cost advantages that will continue to support its growth strategy and repel competitors. The company has adjusted to a decline in carbonated drinks in western markets by focusing on juices and other still beverages while gaining on carbonated ones in emerging markets. The company intends to sell assets in North America, thereby improving the profitability of low-margin businesses. This recent addition to CastleMoore's U.S. Equity portfolio (S&P) has a nice trend and upside target of $63.
Saputo (SAP.TO)
Last purchased on November 26, 2015 at $32.84
A growing stalwart of the Canadian merchandising and consumer products sector, Saputo reported earnings of $0.44 vs. consensus of $0.38, catching most fundamental analysts by surprise. While the global dairy picture remains subdued, the company has some positive tailwinds including volume growth in Canada and the U.S., and potential from a fairly-signed TTP. It has a solid balance sheet and made clear that it is open to acquisitions as large as $3-billion. Technically the stock is in the right sector and has an upside target of $56. A break below $37.33 would be negative.
Past Picks: March 5, 2015
CVS Health (CVS.N)
Then: $103.36 Now: $100.98 -2.30% Total return: -0.88%
iShares China Large Cap ETF (FXI)
Then: $41.70 Now: $33.07 -20.70% Total return: -18.56%
George Weston (WN.TO)
Then: $104.22 Now: $115.14 +10.48% Total return: +12.74%
Total Return Average: -2.23%
Market outlook:
We have consistently held to the thesis since 2007 that the major theme in Western markets is deflation. With U.S. quantitative easing and the first rate hike of a supposed 3-4 more to come, interference in market price discovery has been reduced. The initial reaction has been a strong bid in defensive sectors, areas that are showing positive absolute and relative strength, followed by a reflective up-move in dollar-sensitive and heavily-shorted sectors. The key during the next year will be ensure a "barbell" approach to risk by adjusting the balance of asset and sector allocations. Defensive holdings, such as longer-dated bonds, utilities, consumer staples and infrastructure for example, will provide portfolios with a stable, trending core, while more pro-cyclical areas such as energy, industrials and technology need to be strong individual securities (sector outliers) or the sectors must be bought on weakness for a rental. Spreading out risk in this way, combined with active management, will support positive absolute returns one year from now.