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3 top picks from Wickham’s Michael Bowman

Michael Bowman is executive vice-president and portfolio manager at Wickham Investment Counsel. His focus is on Canadian large caps & ETFs.

Top picks:

IQ Global Agribusiness Small Cap ETF
This ETF follows market-cap-weighted global small companies engaged in the agri-business sector, including crop production and farming, livestock operations, agricultural machinery, agricultural supplies and logistics, agricultural chemicals and biofuels. It is a complement to large-cap agricultural ETFs. Building on the themes of rising food prices, increasing populations and demand for alternative fuels, it is invested 29 per cent in Japan, 20 per cent in the U.S., 9 per cent in the Netherlands and 8 per cent in Australia. It also includes some holdings in China, Indonesia and Spain – but none in Canada.

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Vermilion Energy Inc.
Vermilion owns oil-producing property in Canada, France, Australia, Ireland and the Netherlands and is a core oil holding. It has pricing strength relative to its North American peers, attractive asset diversification and a growing dividend. The company has strong cash flow, and looks to deliver on 2013 production guidance.

Dundee REIT
The company missed on Q4 due to excess cash held during the quarter; property operations were very solid. The portfolio is weighted toward high-quality well-located office properties. The company bought the remaining 50 per cent of the Adelaide St. E. property in Toronto, and also 60 per cent of an Edmonton property. When investors are concerned with worldwide economics they tend to move to REITS that offer yield and stability, and have been a good place to park cash.

Past picks: Sept. 21, 2012

Horizon North Logistics Inc.
Then: $7.61
Now: $5.66
Total return: –25.70 per cent

Valeant Pharmaceuticals International Inc.
Then: $53.35
Now: $77.28
Total return: +44.85 per cent

PowerShares Dynamic Leisure & Entertainment ETF
Then: $23.04
Now: $26.36
Total return: +14.77 per cent

Total return average: +11.31

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Market outlook:

We are looking at slow growth for many years to come, and the economies of the world will face many headwinds. Couple that with the fact that 78 per cent of all trades on U.S. exchanges are made by high-frequency traders, and you soon realize that this time it really is different. Investors need to focus on companies with low debt and stable cash flow. Remember that many of the best-performing companies pay no dividends, or very small dividends. Don't be afraid to use inverse ETFs as hedges against market declines. Look at placing stop-loss orders for some of your positions, and incorporate option strategies. Investors will need every tool at their disposal. The capital markets will continue to be very volatile for much longer than we think, and the days of holding stocks forever are gone.

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