Paul Harris.
Paul Harris is partner and portfolio manager at Avenue Investment Management. His focus is North American and global equities.
Top Picks:
Potash Corp (POT.TO)
Potash Corp. produces potash, phosphate and nitrogen for the agricultural and industrial industries worldwide. The next 6-12 months will be a difficult operating environment and pricing will remain weak; however, long-term we are positive on the demand for potash growth and pricing. The stock pays a 6-per-cent dividend — which we think they will cut — but we would be a buyer as we like the longer-term prospects for the company.
FirstService Corp (FSV.TO)
FirstService was recently spun out of Colliers International. The company focuses on residential property management and services. It has room to grow market share in the U.S. in what remains a very fragmented business. Trades at 20x next year's earnings and yields 1.3 per cent.
Apple (AAPL.O)
Apple is a manufacturing and servicing company for computers and mobile devices. The stock trades at 10.6 times earnings. Take into account that it trades at 8 times earnings and has a 2.40 per cent dividend yield. Although the next several quarters may be difficult with poor iPhone sales, we think we will see better earnings as new products are launched in the third quarter.
Past Picks: May 28, 2015
DH Corp. (DH.TO)
Then: $41.25 Now: $34.35 -16.28% Total return: -14.42%
Element Financial (EFN.TO)
Then: $18.80 Now: $14.70 -21.81% Total return: -21.55%
Mainstreet Equity (MEQ.TO)
Then: $38.25 Now: $36.31 -5.07% Total return: -5.07%
Total Return Average: -13.68%
Market outlook:
We are still constructive on the market over the near term. The market has rallied very aggressively in the last two months after we saw the sell-off in Jan and Feb. Near term we could see a little selling pressure, and we haven't been quite able to push through the psychological resistance on the TSX at 14,000.
With the federal budget coming out, we feel the Bank of Canada is now on hold with regards to any more rate cuts. The cuts that the BoC made last year are now making their way through the economy, showing an effect on FX rates. We are seeing this on strength in the Ontario, B.C., and Quebec economies.
For the market to head higher from here, we would need to see oil stabilize at these levels, or potentially move higher. Also the near-term rally in the Canadian dollar needs to subside. Further positive economic data out of Canada would also help provide another leg up for the market.
Big risks still lurk in China. They've needed to take on piles of new debt to add additional growth and stabilize their economy. Any further weakness out of China would provide serious headwinds for commodities, which would put pressure back on the TSX.