Christine Poole is CEO and managing director, GlobeInvest Capital Management. Her focus is North American large caps.
CGI Group (GIB.A-T)
Recent purchase price $49 range in November 2015.
CGI is a global technology services firm deriving 54 per cent of its revenues from outsourcing and 46 per cent from systems integration and consulting. Its revenue breakdown by geography consists of 53 per cent in Europe, 27 per cent in the United States, 15 per cent in Canada and 5 per cent in Asia-Pacific. Management remains focused on creating shareholder value through profitable organic growth, accretive acquisitions at reasonable prices within a consolidating IT services market, and share repurchases.
Recent purchase price $66.50 in November 2015.
Loblaw is Canada's largest grocery retailer, offering consumers multiple formats, and the leading national drugstore operator through Shoppers Drug Mart. Operational efficiencies from its store renovation program and IT/supply chain investments as well as synergies arising from the Shoppers' acquisition will drive margin improvement and cash flow growth. Loblaw is also benefitting from moderating grocery retail square footage growth compared to prior years. Loblaw provides a current yield of 1.4 per cent.
CVS Health (CVS-N)
Recent purchase price $99.90 in November 2015.
CVS is a leading retail pharmacy chain (67 per cent of operating profits) and pharmacy benefits manager (33 per cent of operating profits) in the United States. The retail pharmacy division consists of more than 8,000 retail drugstores. Caremark, the company's PBM, provides drug benefit services to employers, governments and insurance companies.
Past Picks: November 11, 2014
Chartwell Retirement Residences (CSH.UN-T)
Then: $11.57 Now: $13.01 +12.45% Total return: +17.65%
Walt Disney (DIS-N)
Then: $89.98 Now: $118.67 +31.88% Total return: +34.30%
PPG Industries (PPG-N) *Stock Split - 2 for 1 on June 15
Then: $205.26 Now: $106.46 +3.73% Total return: +5.08%
Equity markets are consolidating after a strong rebound in October. With third quarter earnings season in the U.S. largely complete and coming in generally as expected, investors are once again focused on the impact of rising U.S. interest rates on markets. Following October's robust employment report, consensus is that the December rate hike is on. The trajectory of policy normalization is expected to be gradual and measured, given relatively benign inflationary pressures.
On the global front, concerns of an imminent collapse in the Chinese economy have abated, following additional policy measures to stabilize and stimulate economic growth. These include:
- The cut to the minimum home down payment required of first-time buyers to 25 per cent (from 30 per cent), for the first time in five years
- The reduction in the vehicle purchase tax to 5 per cent (from 10 per cent) on autos with 1.6-litre engine and below, a segment that represents about 70% of the Chinese auto market
- Accommodative monetary policy announcements by the PBOC including interest rate cuts and lower reserve requirement ratios for Chinese banks.
Economic growth within the Eurozone remains lackluster, so more stimulus can be expected from the European Central Bank.
With valuation multiples trading close to historical averages, corporate profit growth will be the primary driver for equity markets. The negative profit impact from the collapse in the crude oil price and a strong U.S. dollar should ease into 2016. Consensus earnings growth forecast for the S&P 500 companies is flat in 2015 or up 4 per cent, excluding energy, and 8.5 per cent in 2016. Equities are expected to continue to grind higher.