Christine Poole is CEO and managing director at GlobeInvest Capital Management. Her focus is North American large caps.
Top Picks:
Loblaw (L.TO)
Loblaw is Canada's largest grocery retailer, offering consumers multiple formats and the leading national drugstore operator through Shoppers Drug Mart. Operational efficiencies from its store renovation program and IT/supply chain investments, as well as synergies arising from the Shoppers' acquisition, will drive margin improvement and cash flow growth. Having met its debt reduction targets from the Shopper's acquisition, the company will deploy free cash flow for share repurchase and dividend increases. Loblaw provides a current yield of 1.5 per cent.
Home Depot (HD.N)
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 per cent). Home Depot's 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.
Walt Disney Co (DIS.N)
Disney is a media conglomerate and premier content provider, comprised of Cable Networks & Broadcasting (53 per cent of operating income), Parks & Resorts (21 per cent), Studio Entertainment (13 per cent) and Consumer Products (13 per cent). Its strong global brand portfolio — including Disney, ESPN, Pixar, Marvel, and LucasFilm — supports a multi-platform strategy to exploit content and intellectual property across its business segments. Disney provides a dividend yield of 1.4 per cent.
Past Picks: May 12, 2015
Cineplex (CGX.TO)
Then: $48.89 Now: $51.15 +4.62% Total return: +8.04%
CGI Group (GIB.A.TO)
Then: $51.73 Now: $59.00 +14.05% Total return: +14.05%
Johnson & Johnson (JNJ.N)
Then: $100.47 Now: $113.59 +13.06% Total return: +16.45%
Total Return Average: +12.85%
Market outlook:
The underlying fundamentals of the U.S. economy remain encouraging. The employment situation is healthy, manufacturing activity is rebounding and conditions in the non-manufacturing sectors are flourishing. Nonetheless, stock markets are somewhat range-bound, reflecting uncertainty regarding the pace of interest rates hikes by the U.S. Fed, the inflection point when corporate profit growth turns positive and global political events.
Within Canada, strength in crude oil has been driven by near-term, unexpected supply disruptions, with energy equities moving upwards in unison. Commodity prices have also benefited from a relatively weaker U.S. dollar and improved sentiment. At this juncture, the initial assessment regarding the Fort McMurray fires are that the near-term negative economic effect will be offset by the rebuilding process later in the year.
U.S. earnings season is winding down, coming in largely as expected with Q1 2016 earnings per share down about 5 per cent year-over-year, or flat excluding energy. Year-over-year comparisons are expected to turn positive in the second half of the year, providing a conducive environment for equities.