Michael Smedley.Fred Lum/The Globe and Mail
Michael Smedley is executive vice-president and chief investment officer at Morgan Meighen & Associates. His focus is Canadian equities.
Top Picks:
McDonald's (MCD.N)
In the present negative state of markets and global unhappiness, earthlings could think about gravitating toward the greatest junk food enterprise on earth. McDonald's, in the doldrums for years, is a surprising short-term winner that might just continue to break out. Junk is king, as oozing, fat glimmering burgers and pizza in TV ads seem to have interrupted the trend in greenness and purity under the guidance of expert marketers. Some investors see McDonald's as a happiness destination, as it attempts the switch to higher-class junk to try to match a strongly performing peer group.
Mountain Province Diamond (MPV.TO)
Wealth is required for entry into the underworld, and ownership of diamonds is a qualifier. Mountain Province is also a unique way for earthling investors to capture extraordinary annual income. Its Canadian mine, actually the first major mine discovery in 20 years and shared with de Beers, is two-thirds or more complete and in 2017 should start to generate an annual dividend yield around 27 per cent.
Seabridge Gold (SEA.TO)
Should become another way of accessing the underworld. This company controls an immense asset, apparently the largest undeveloped metals asset in Canada, perhaps North America. The deposit has been transformed from a gold target to a gold/copper asset, taking it potentially into the base metals sector as well. The challenge will be patience as Seabridge more than doubled under buying pressure from a far sighted investor, at least one in my estimation. I am now watching for a lower point of entry.
Past Picks: August 21, 2014
BlackBerry (BB.TO)
Then: $10.78 Now: $9.53 -11.60% Total return: -11.60%
NeuLion (NLN.TO)
Then: $1.06 Now: $0.72 -32.08% Total return: -32.08%
Algoma Central (ALC.TO)
Then: $16.00 Now: $15.33 -4.19% Total return: -2.57%
Total Return Average: -15.42%
Market outlook:
As Halloween is with us and long months of early darkness in North America have arrived, the legions of opposing forces will be scurrying with increasing energy on and below the surface of the earth. This is seasonally normal, but this year it is unfortunately a continuation of messy market conditions. Sub-surface scurrying intrigues most of all, as the metals inexplicably show a whiff of a recovery. Inventory excesses are mostly not apparent, mining costs are lower, grades have long been falling and mine closures are stepping up.
There is some good exploration news; new mines really are a-building. There is a certain order in the cyclical trends. Metal sector prices collapsed long ago, oils flushed away later seem to be falling still, and it is my belief that the devil likes rotational order.
Suddenly, Mr. Putin is trying to bring order to the Middle East. He has become the main man at Halloween with The Donald in the no. 2 spot, while in Canada we go forward experimenting with a nice young man who appears to be leaning towards deficit budgeting. All of this can lead to important influences on markets — though to what extent is hard to say — but big change in the state of markets appears to be as unlikely as the Fed increasing rates. For now, I plan to go forward step-by-step, stock-by-stock twixt the devil and the deep blue sea.