Christine Poole is CEO and managing director of GlobeInvest Capital Management. Her focus is North American large caps.
Top Picks:
Alphabet (GOOGL.O)
Recent purchased at the $708 price range in February 2016
Alphabet is a global technology company, providing the world's leading search engine, Google, which dominates in both global desktop and mobile search engine queries. Online advertising represents over 90 per cent of revenues. Google benefits from the secular shift to online/internet advertising, which represents about 30 per cent of total global ad spending. Google garners a consistently strong share in digital/internet based advertising spending. Its "Other Bets" segment consists of medium- to long-term initiatives outside of Google's core internet business. Alphabet represents an attractive investment for investors looking for internet exposure.
Home Depot (HD.N)
Recently purchased at the $118 price range in February 2016
Home Depot is the leading home improvement specialty retailer with 2,270 stores covering the U.S. (87 per cent of stores), Canada (8 per cent) and Mexico (5 percent ). Its business benefits from the cyclical recovery in the U.S. housing market, improving employment, rising consumer confidence and an aging housing stock. Private fixed residential investment as a share of GDP remains below the historical average. Ongoing initiatives to increase store and supply chain productivity, support online sales and develop programs focused on the lucrative professional customer are drivers of future growth. HD has a proven track record of consistently reducing share count and raising dividends, providing investors with a yield of 2.1 per cent.
Cineplex (CGX .TO)
Recent purchased at the $47.75 price range in February 2016
Cineplex is Canada's dominate film exhibition operator with an estimated 80 per cent of Canadian box office revenues. Management maximizes revenue per patron through increasing concession spending and offering premium priced formats, including 3D films, D-BOX seating and VIP auditoriums. Alternative programming at its theatres such as the Met Opera and Dance Series is also offered to drive traffic into its theatres. Sources of future growth include The Rec Room and eSports. Cineplex provides an attractive 3.3-per-cent yield
Past Picks: February 10, 2015
Royal Bank (RY.TO)
Then: $76.42 Now: $67.64 -11.49% Total return: -7.73%
PPG Industries (PPG.N) *Stock Split* June 15, 2015- 2 for 1
Then: $228.24 Now: $90.99 -20.27% Total return: -19.23%
Loblaw (L.TO)
Then: $62.88 Now: $63.84 +1.53% Total return: +3.10%
Total Return Average: -7.95%
Market outlook:
The risk-off trade is dominating equity markets. Recession fears, emerging markets contagion, and crude oil price swings are some of the factors tempering investor enthusiasm for equities. Undeniably, the collapse in energy prices has significantly negatively affected economic conditions in regions which are overly dependent on energy revenues. Investor angst about the oil markets and impact on the U.S. economy, however, appear be excessive. The energy sector accounts for less than 5 per cent of 2016 S&P 500 profits, energy industry employment accounts for 1 per cent of U.S. jobs and energy expenditures represent about 0.5 per cent of GDP. Low oil prices do not usually cause recessions.
The American consumer is in good health. Real disposable income per capita is rising, the employment situation is robust and consumer confidence/sentiment are at relatively high levels. The non-manufacturing or services sectors, which cover almost 90 per cent of the U.S. economy, remain solidly in expansionary mode.
Turmoil in global markets, deflationary pressures from falling energy and commodity prices and uneven economic measures suggest the pace of U.S. interest rate increases will be very gradual, or possibly even put on hold this year. Statements by the Fed that the actual path of the funds rate will depend on the economic outlook and thus is data-dependent, suggest elevated sensitivity to daily economic events and market stock price action more volatile than underlying fundamentals will persist.
The dual headwinds of a strong currency and collapse in energy prices has muted U.S. corporate profit growth. However, comparisons should ease as the year progresses. So far, Q4/15 earnings for the S&P 500 companies are down about 2 per cent year-over-year (or up 5.4 per cent excluding energy). For 2016, profit growth is expected to be up 5 per cent.