Skip to main content
bnn market call

Gavin Graham.Kevin Van Paassen/The Globe and Mail

Gavin Graham is chief strategy officer at Integris Pension Management Corp. His focus is global equities and North American large caps.

Top picks:

Capital Power

The largest electricity supplier in Alberta with 2,500 KW capacity, Capital Power operates a group of power plants diversified geographically and by power source, with operations in Alberta, B.C., North Carolina and Ontario, and fuelled by coal, gas, and wind. Spun off from its former parent EPCOR in 2009, it sells for a reasonable 15.6 times P/E and yields 5.6 per cent.

Corus Entertainment Inc

Corus is a leading specialty media company with strong positions in children's and women's programming owning YTV, Treehouse, Nickelodeon and Teletoon as well as W and the Oprah Winfrey Network. It recently bought the other half of Teletoon and two specialty TV channels in Quebec, as well as two English radio stations from Astral, and sells for a reasonable 13 times P/E and a 4-per-cent yield.

Allied Properties REIT

Allied is a specialty REIT that buys former industrial (Class I) properties on the fringes of the downtown core in Toronto, Montreal and latterly Calgary and KW and coverts them to offices (brick and beam) often costing 50-per-cent less than Class A space. With over $3-billion in assets, it has 94-per-cent occupancy, a payout ratio in the low 90-per-cent range and yields 4.2 per cent.

Note: All three top picks are personally owned by my family and myself, and are recommended in the Income Investor newsletter.

Past Picks: May 31, 2013

Agnico Eagle Mines

Then: $33.70
Now: $37.21, +10.42%
Total return: +12.40%

Beam Inc.

Beam, which was a pick last May at $60.50 (U.S.), has had a takeover offer at $84 which I recommend accepting.

Then: $64.84
Now: $83.19, +28.30%
Total return: +29.53%

Manulife Financial Corp.

Then: $16.42 (Cdn)
Now: $20.83, +26.86%
Total return: +29.43%

Total return average: +23.79%

Market outlook:

The crisis in Ukraine and Crimea and economic slowdown in China combined with tapering by the U.S. Federal Reserve have reminded investors that there are risks to the downside, with emerging markets off 8 per cent, year-to-date, and major markets struggling to break their all-time highs after a strong performance in 2013. With signs of exuberance such as a wave of IPOs and biotech stock going parabolic in the U.S., investors would be well advised to take some profits off the table. With non-Canadian markets up 15-20 per cent plus currency gains over the last year, reducing international equity exposure by a quarter would rebalance portfolios back to where they were at the start of 2013. Long-dated bonds remain unattractive as long as tapering continues, although keeping some exposure to shorter-dated fixed income is prudent.