Jaime Carrasco is director and associate portfolio manager at Bank of Nova Scotia. His focus is resource and utilities stocks and REITs.
Central Fund of Canada (CEFa.TO)
Agnico Eagle (AEM.TO)
Past Picks: Dec 12, 2014
Pembina Pipeline (PPL.TO)
Then: $37.14 Now: $30.48 -17.93% Total return: -13.06%
Agnico Eagle (AEM.TO)
Then: $28.05 Now: $38.64 +37.75% Total return: +39.32%
Total Return Average: +13.13%
In the portfolio, I am holding steady to higher amounts of cash, waiting on the sidelines to gauge the extent of this recent market decline. In December, we sold the last remaining U.S. exposure to health care and U.S. blue chips. I think the theme for 2016 will be the global slowdown, and the continually growing geopolitical conflicts which seem to growing by the day.
One benefit we are seeing in this environment is the earnings increase being sustained by our Canada-based gold producers as they benefit from a declining loonie which is now translating into $1,600 gold, a $200 (14-per-cent) increase since the $1,400 low of November 2015. Canada is being afflicted by the deflationary storm being felt elsewhere in the world, and gold in Canadian dollars is doing exactly what it has always done in time of monetary stress – gaining in value, and some producers are reaping the rewards. Furthermore, only the best producers are now left after the massive cleansing the industry has undergone since 2011, giving us a great entry point to start to add exposure to the sector.
In the energy sector, I am still waiting for a wave of bankruptcies from the over-indebted U.S. oil frackers, especially now that the U.S. Federal Reserve has raised rates and pulled funding from the sector. Once this cleansing begins, I think we will see the bottom for WTI and a good entry point into this sector. In the meantime, we wait.
I continue to focus on building the portfolio by acquiring inexpensive, good-quality companies with solid financial leverage for future growth, while maintaining flexibility in cash levels to deal with the reality of the volatile times we are living through. During this period of low interest rates, income generation has been challenging, in that income investors have had to seek cash flow from equity investments. These tend to be more volatile and required a flexible strategy. My team provides exceptional investment advice and research, and identifies unseen opportunities while providing unique wealth management solutions.
These are my views and not those of Scotiabank.