Mike Newton is director, wealth management & portfolio manager, Scotia Wealth Management. His focus is North American large caps and ETFs.
Top Picks:
Adobe Systems (ADBE.O)
Most recent purchase last week at US$97
Adobe is migrating to a subscription-based model, which instantly makes their software more affordable and is clearly spurring adoption of the product. Adobe should continue to grow users, grow adoption, and convert people who have been using either old or possibly pirated versions to the new model. The company's cash from operations is greater than its earnings per share, so it is actually a little bit cheaper on a cash-flow multiple. There is plenty of upside for a $39-billion (U.S.) company with a huge addressable market and a very loyal customer base. The valuation is still reasonable for the growth I expect it to show.
Comcast (CMCSA.O)
Most recent purchase last week at US$61.00
CMCSA delivered superior revenue and EBITDA growth rates. Its NBCU diversification allows it to negotiate better programming costs, as well as providing the company with attractive growth prospects given the strong movie slate at Universal. CMCSA recently increased its dividend by 10 per cent and announced a $10-billion share repurchase program, with $5.0-billion occurring in 2016. Overnight, it was reported in the WSJ that Comcast is in talks to buy DreamWorks Animation for more than $3-billion, which would represent less than 2 per cent of CMCSA's market cap.
AutoCanada (ACQ.TO)
Most recent purchase at $20.70 on April 15th
AutoCanada is Canada's largest multi-location and first publicly traded franchise automobile dealership group. Based in Edmonton, AutoCanada operates or manages 48 dealerships across Canada and has over 3,600 employees. While analysts expect continued pressure in Alberta until its economy recovers from declining oil prices, I believe the sales decline has already been adequately priced into the company's share value and is partially mitigated by modest growth in BC and Ontario. ACQ remains well positioned to continue its growth by acquisition. We are picking up shares very cheaply while enjoying a yield of 5 per cent.
Past Picks: April 15, 2015
JPMorgan (JPM.N)
Then: $64.21 Now: $64.11 -0.16% Total return: +2.67%
Chipotle Mexican Grill (CMG.N)
Then: $677.60 Now: $417.22 -38.43% Total return: -38.43%
Constellation Brands (STZ.N)
Then: $117.52 Now: $156.64 +33.29% Total return: +34.60%
Total Return Average: -0.39%
Market outlook:
Everyone is waiting for global growth to become strong enough to absorb a stronger U.S. dollar. This U.S. dollar depreciation is working wonders, boosting commodity prices and flaming inflation expectations. From a Canadian investor perspective, this is certainly providing some welcome relief. Sometime around the Trudeau election, sentiment started to shift in favour of Canada. Unfortunately, I am not completely convinced that Canadian fundamentals will fully validate this rally and that the U.S. dollar will resume its strength. Do not swing completely in or out of Canada; instead, the best portfolio positioning will still prove to be a healthy mix of both Canadian and U.S. and global equities.