Gordon Reid is president and CEO, Goodreid Investment Counsel. His focus is U.S. equities.
Top Picks:
Home Depot (HD.N)
Last purchased in Feb 2016 at $119
Home Depot is growing well, attractively priced, well-managed and has multiple favourable trends supporting it. Household formation numbers are rising slowly but are still lagging population growth. Interest rates remain low and lending standards are more relaxed than in past years. Unemployment is falling and GDP growth is steady. At less than 20 times earnings, Goodreid believes this issue is a buy.
Lear (LEA.N)
Last purchased in Feb 2016 at $104
This company, a supplier of automotive seating systems, has operations in 35 countries and is a supplier to virtually the entire automotive industry. It is currently trading at 10 times earnings, while expectations are for a mid-teens growth rate in sales, cash flow and earnings over the next few years.
Citigroup (C.N)
Last purchased in Feb 2016 at $39
Citigroup recently traded at less than 60 per cent of tangible book value, a level that is so negative that with even tepid results, the opportunity within Citigroup is well above average. Earnings are likely to remain in the $5-$6 range until the economy strengthens to a point that the Fed meaningfully increases rates.
Past Picks: February 25, 2015
Facebook (FB.O)
Then: $79.56 Now: $105.20 +32.23% Total return: +32.23%
Regal Beloit (RBC.N)
Then: $78.21 Now: $53.48 -31.62% Total return: -30.66%
Citigroup (C.N)
Then: $52.09 Now: $39.78 -23.63% Total return: -23.33%
Total Return Average: -7.25%
Market outlook:
Market corrections, while no doubt uncomfortable, have a constructive element. Lower prices create lower expectations. Sentiment, an accurate contrary indicator, is very poor. Valuations have also dropped to below average levels. Corporate profits, while sluggish, are being constrained by two major factors: oil company results and a strong U.S. dollar. Both are likely to be transitory. Goodreid expects flat market performance for 2016, which means that the remainder of the year should be modestly positive.