Paul Harris is partner and portfolio manager at Avenue Investment Management. His focus is North American and global equities.
DH Corp. (DH.TO)
DH Corp. provides technology for the financial services industry. The company is expanding out of the traditional cheque producing business through bolt on acquisitions in the US. The stock trades at 17 times earnings and has a 3.9 percent dividend yield.
Element Financial (EFN.TO)
Element is one of North America's leading equipment finance companies within the four verticals of commercial & vendor finance, aviation finance, rail finance, and fleet management. The company has strong exposure to the U.S. after their PHH Corp. acquisition last year (acquired their U.S. fleet leasing business) and are well positioned to benefit from the resurgence of the US economy and growth in lease financing. Trading 12.9x 2016 earnings
Mainstreet Equity (MEQ.TO)
Mainstreet Equity is one of the cheapest stocks on the TSX. It trades at a 25 percent discount to its net asset value. Although there will be weakening in the Alberta economy, there should be very little impact to the mid-level rental markets due to a "tight" rental market. The balance sheet is liquid and future acquisitions should occur. Net Operating Income is growing around 15 percent , and the company is well positioned owning properties near the new Rexall Centre in Edmonton
Deere & Company (DE.N)
Then: $91.10; Now: $93.50; +2.63%; Total Return: +5.48%
Then: $80.19; Now: $70.60 -11.96%; Total Return: -9.98%
Bank of America (BAC.N)
Then: $15.15; Now: $16.67 +10.03%; Total Return: +11.12%
Total Return Average: +2.21%
The Canadian markets will have to embrace volatility in bond yields and oil prices in the interim. Besides these ancillary issues, the stock market should perform well due to sustainable corporate profitability, relatively low interest rates and low labour wage pressures. The North American economy should grow more than 3 percent, catching up from a very harsh winter for the continent. The lower Canadian dollar should help profitability for Canadian companies in the upcoming quarters. Valuations for both TSX and S&P are in the middle range. The near-term risk is a "melt up" surprise, and not a "melt down".