Gordon Reid is president and CEO of Goodreid Investment Counsel. His focus is U.S. equities.
Top Picks:
Citigroup (C-N)
Latest purchase: June 2016 at $47.00
Citigroup's stock price is hostage to the Fed's action on interest rates. Downside protection is firm as this stock trades at very compelling valuation levels. The upside is contingent on a steeping of the yield curve which will add meaningfully to the bank's profits. In the current environment, owning the financials is likely a winning strategy.
Time Warner (TWX-N)
Latest purchase: June 2016 at $75.00
Time Warner's growth engine is its digital platforms, which will capture the growing mobile market for film (Warner Bros.), television (HBO, CNN) and publishing (People). Their strategic plan is working but has yet to be fully embraced by investors. At less than 14 times expected 2016 earnings and an annual growth rate in the mid-teens, this stock should be bought.
Toll Brothers (TOL-N)
Latest purchase: March 2016 at $28.00
A weak first quarter for the homebuilders set stock prices back, but long-term fundamentals are intact. New orders and prices are firm and the industry will work through transient issues of tight labour, regional spikes in land prices, etc. Goodreid expects TOL to grow revenues, earnings and cash flow at an annual clip of 10-15 per cent over the next few years but the stock today trades at only 11 times earnings.
Past Picks: June 16, 2015
Verizon (VZ-N)
Then: $47.42 Now: $52.87 +11.49% Total return: +16.90%
Wells Fargo (WFC-N)
Then: $57.22 Now: $46.78 -18.25% Total return: -15.85%
Tenneco (TEN-N)
Then: $60.16 Now: $53.00 -11.90% Total return: -11.90%
Market outlook:
Market participants are facing a number of uncomfortable macro issues, including the upcoming Brexit vote, Fed tightening and of course the U.S. Presidential election. This will translate into a see-saw market performance while we work through the year, but as visibility improves expect the market to move with more conviction. Keep in mind that the market detests uncertainty, so a resolution of these issues is likely to be constructive for equities.