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bnn market call

Paul Gardner is partner and portfolio manager at Avenue Investment Management. His focus is on large-cap dividend-paying stocks, REITs and fixed income.

Top Picks:

Tricon Capital (TCN TSX)

Tricon Capital is a real estate asset manager that focuses on U.S. residential in post-crisis hard hit areas such as Miami. Its acquisition strategy coupled with its strong asset management business has allowed the company to execute and beat recent earnings numbers.

Canadian Natural Resources (CNQ TSX)

Canadian Natural Resources is a heavy oil and natural gas producer that is located in Western Canada. The company creates tremendous free cash flow and it trades cheaply at 4x price/ cash flow. Historically it has traded as high as 7x. The oil selloff is not as pronounced in Canada due to Canadian producers pricing in U.S. dollars and the differential between heavy and light is now narrower.

Mainstreet Equity (MEQ TSX)

Mainstreet Equity owns low-rise apartment buildings in Alberta and B.C. The western economy's outperformance has created net migration favouring both provinces. A tight rental market due to low vacancy rates in Edmonton's new city centre development intensification will only help Mainstreet's properties even more valuable. The stock trades at a 15-per-cent discount to its net asset value. All these factors will contribute to a higher share price over the medium term.

Past Picks: February 11, 2014

Leon's Furniture (LNF TSX)

Then: $14.93; Now: $14.23 -4.69%; Total return: -2.76%

Mainstreet Equity (MEQ TSX)

Then: $36.54; Now: $40.17 +9.93%; TR: +9.93%

Timbercreek Mortgage (TMC TSX)

Then: $9.17; Now: $8.52 -7.09%; TR: -1.17%

Total return average: +2.00%

Disclosure:

Personal

Family

Portfolio/Fund

LNF

Y

Y

Y

MEQ

Y

Y

Y

TMC

Y

Y

Y

Market outlook:

The equity markets survived October's correction. At Avenue, we believe the market will continue to "grind" higher due a number of positive factors. This past earnings season came in higher than analysts' expectations. The job growth numbers, coupled with lower energy prices, will give a short-term and medium-term boost to U.S. GDP. Seasonality will kick in with a Christmas rally going into the end of this year. Valuations of the equity markets are reasonable with a good earnings' reporting season. Inflation expectations are at the low end keeping long-term interest rates low. Central banks will have a hard time raising rates aggressively due to slower emerging market growth and global overcapacity.

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