Jaime Carrasco.
Jaime Carrasco is director and associate portfolio manager at Scotiabank Wealth Management. His focus is resource an utilities stocks and REITs.
Top Picks:
Americas Silver (USA.TO)
This consideration has been a constant top pick for the last few years due to its management team, the geographical location of the assets and the quality of the ore on the ground. The management team comes from Barrick Gold, and thanks to their experience, this company has thrived and grown in one of the toughest markets, taking a company producing 500,000 ounces at $35.00, to the current 5 million ounces at $12. Going forward I expect much from this pick as the cost production will continue to drop, and the price of silver will most likely continue to climb.
Barkerville Gold (BGM.TO)
Barkerville will go into production by years end and will become one of Canada's biggest producing gold mines. They have an excellent management team headed by Thomas Obradovich and the backing of some of Canada's most savvy mining investors, including Eric Sprott. They have a high-grade deposit in British Columbia.
Vermilion Energy (VET.TO)
Vermilion has been a steadfast pick in the energy sector, and good way to begin adding to a sector that I have been mostly out of since the fall of 2014, having reduced my position from 25 per cent to 5 per cent. I am currently bringing my sector allocation to 10 per cent, and Vermillion offers a good entry point due to the low cost production, quality of the assets and the fact that it is also a global play subject to Brent pricing with a 6-per-cent dividend yield.
Past Picks: May 1, 2015
Dream Global REIT (DRG_u.TO) Sold Oct 2015
Then: $10.18 Now: $9.09 -10.71% Total return: -2.34%
Freehold Royalties (FRU.TO)
Then: $17.93 Now: $11.16 -37.76% Total return: -37.76%
Americas Silver (USA.TO) (Formerly Scorpio Mining)
Then: $0.21 Now: $0.33 +57.14% Total return: +57.14%
Total Return Average: +5.68%
Market outlook:
Uncertainty will be the main constant for the remainder of the year. In the U.S., we have the Trump vs Clinton presidential race and uncertainty as to whether the Fed will raise interest rates in the months ahead. In Europe, Brexit and the ongoing problems in the European banking sector loom. In China and Asia, we have the economic consequences of the housing bubble and an ongoing economic slowdown, and finally the economic and geopolitical mess of the Middle East. All this in the context of a slowing global economy, which is being hindered by an unprecedented level of sovereign debt. All in all, not a very positive picture for the markets and global currencies. In this reality, I continue to recommend that clients take a contrarian stance and prepare for harder times ahead.
Since the beginning of the year, the best performing sector has been precious metals, and clients have been well rewarded from their "financial insurance." I continue to recommend that clients keep higher levels of cash and consider some physical gold and silver as a component of that cash position. Furthermore, I recommend at least a 15-per-cent allocation of the portfolio into precious metals producers, as they will have the best leverage in this environment. Ongoing uncertainty should continue to be positive for the monetary metals and translate into higher levels by year-end. While the shorts continue to pile up in the paper market, gold has been forming a good base in the $1,250 (U.S.) to $1,300 range since March 2015, boding very well for a great short-covering rally when we break through $1,300. I continue to recommend that we hold the positions and patiently wait for the next move up. Gold is at $1,650.
On the energy front, I have increased my allocation to energy to 10 per cent from the 5 per cent we had been maintaining since the fall of 2014. Energy prices have rebounded and have nicely settled in the mid $40s. It looks like we have seen the bottom, giving us time to begin repositioning our considerations. As for the overall market, I remain cautious, as I don't believe that the economy will catch up to current valuations, leaving us with a highly overvalued market at lofty levels, not a good position for the longs. To play this disconnect, I continue to add a long/short hedge fund to the portfolio as a way to play the downside. However, this is an investment vehicle for accredited investors only, and therefore recommend higher levels of cash for other clients. I remain cautious and nimble in my positions.
It's important to recognize that these are my opinions and not those of Scotiabank. I believe my team provides exceptional investment advice, research, and identifies unseen opportunities while providing unique wealth management solutions. The cost of this high standard of advice and service is fair, consistent, and competitive. We encourage you to give us a call and compare for yourself. My views can best be followed through my LinkedIn page, where you will find my contact info.