Mike Newton is portfolio manager and director of The Newton Group, ScotiaMcLeod. His focus is North American large caps and ETFs.
Top Picks:
iShares Trust Dow Jones U.S. Healthcare Sector (IYH)
The iShares U.S. health care ETF garners exposure to U.S. health care. The top holdings include Johnson & Johnson, Pfizer, Gilead and Merck. At present, it is primarily composed of 40 per cent pharmaceutical and 24 per cent biotech exposure. The health care sector has been leading the market higher since 2011 and its positive outlook remains intact. Health care stocks were once considered a defensive area of the market similar to consumer staples and utilities. Presently these stocks have transitioned to a more growth-oriented phase that has been driven by the biotech boom and continued advancements in the medical field. For those investors looking to emphasize less economically sensitive parts of the market they should continue to favour health care, which historically has been less sensitive to rising rates than other traditionally defensive sectors.
Constellation Brands (STZ.N)
Constellation Brands continues to gain market share in the beer market following the integration of Crown Imports. The growth is being supported by strong demand for its beer brands on increased marketing support and new product launches. Constellation is the number three beer company in the U.S. with high-end, iconic imported brands including Corona, Modelo Especial, and Pacifico. Constellation is also the world's leader in premium wine including Robert Mondavi, Clos du Bois, Kim Crawford, Ruffino and Jackson-Triggs.
Alimentation Couche-Tard (ATDb.TO)
Couche-Tard, the second-largest convenience store operator in North America (7-Eleven is #1), touched new all-time highs recently as they continue to deliver solid results from underlying operations. This month, on July 14, they will report earnings including an update on their acquisition of The Pantry completed back in March. ATD has been very active as an industry consolidator and has demonstrated an ability to significantly enhance the profitability of acquisitions post-transaction. I expect ATD to continue deliver strong share price performance based on my view that actual consumer spending trends will prove more favourable than currently anticipated.
Past Picks: August 13, 2014
Boeing (BA.N)
Then: $121.98; Now: $140.21; +14.95%; Total return: +17.08%
FedEx (FDX.N)
Then: $149.35; Now: $171.13; +14.58%; Total return: +15.15%
WesternOne (WEQ.TO)
Then: $7.83; Now: $0.68; -91.32%; Total return: -90.71%
Total Return Average: -19.43%
Market outlook:
Troubling as the current headlines may appear, I think the risk of contagion is lower than previous debt crises and I see current market malaise as an opportunity to initiate or add to excellent individual companies and sectors. Even though I am advocating staying invested, if the macro situation does worsen and starts to derail the markets, I am afraid most investors will be unprepared. So ask yourself: do I have a plan in place to deal with potential losses beyond a normal correction if they occur? That should be the number one question right now. At The Newton Group we utilize stop loss programs to mitigate risk.