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Stan Wong

Stan Wong is director and portfolio manager at Scotia Wealth Management. His focus is North American large caps and ETFs.

Top Picks:

Cineplex (CGX.TO)

Last bought in October 2015 at ~C$49

Cineplex is one of Canada's leading entertainment companies, operating over 160 theatres and serving over 77 million patrons annually. Cineplex shareholders benefit from the company's dominant franchise branding, strong management and strategic execution.

Cineplex continues to benefit from a strong slate of recent and upcoming movie releases. The VIP theatre concept and strong attendance numbers have provided a meaningful lift to concession sales (which represent over 30 per cent of overall revenues). As well, Cineplex's loyalty program (Scene) has grown to over 7.3 million members. Beyond the box office business, Cineplex is strategically diversifying its revenue streams through other segments including social entertainment (The Rec Room), amusement gaming, home entertainment, media and electronic sports. Cineplex shares are low-beta relative to the market and pay an attractive dividend yield of 3 per cent.

Celgene (CELG.O)

Last bought in February 2016 at ~US$103

Celgene is a biopharmaceutical company focusing on the discovery, development and commercialization of therapies designed to treat cancer and other severe immune, inflammatory conditions. CELG continues to have strong growth prospects and will benefit from aging demographics in the long term. CELG's therapy pipeline is very robust, allowing for further diversification of its revenue stream over the next several years. The shares are compelling, trading at a 19x forward price-earnings multiple with a long-term projected earnings per share (EPS) compound annual earnings growth rate (CAGR) of over 20 per cent.

Nike (NKE.N)

Last bought in January 2016 at ~US$59

Nike Inc. is the world's leading designer and marketer of high-quality athletic footwear, athletic apparel and accessories. Sales growth continues to accelerate at Nike across all business lines and key geographies (particularly China). Indeed, Nike has beaten consensus earnings expectations for the last 15 consecutive quarters. Looking ahead, Nike's strategic growth drivers are expected to be women's footwear and apparel, further expansion in China and continued strength in the basketball category (in which Nike dominates). Reflecting the strength in its balance sheet, NKE recently announced a $12-billion (U.S.) share buyback program. NKE shares currently trade at a forward price-earnings multiple of 26x with an estimated long-term earnings per share (EPS) compound annual growth rate (CAGR) of over 14 per cent. The recent weakness in its shares provides a compelling buying opportunity, with NKE trading back down again near its 200-day moving average.

Past Picks: April 9, 2015

Citigroup (C.N) stop loss at ~$40 in January 2016;

Then: $52.13 Now: $41.86 -19.70% Total return: -19.38%

Simon Property Group (SPG.N)

Then: $193.13 Now: $208.66 +8.04% Total return: +11.72%

WisdomTree Europe Hedged Equity ETF (HEDJ.N)

Then: $67.98 Now: $50.91 -25.11% Total return: -18.00%

Total Return Average: -8.55%

Market outlook:

North American equity markets have recovered from the sharp correction felt in the early weeks of the year, as fears of a global recession have subsided. More stable commodity prices, decent economic data and a slower expected pace of rate increases by the U.S. Federal Reserve have helped equity prices rebound nicely.

However, equity markets may be hitting a near-term ceiling, with valuations looking a bit extended. Both the S&P 500 and TSX indexes are trading at about 17x forward price-earnings multiples, a premium to the 10-year average of about 14x forward price-earnings multiple for both indices. As well, market sentiment could be tested in the coming months with the U.K. referendum in June and the U.S. Republican convention in July.

From a technical perspective, North American equity markets appear to have run into some near-term upside resistance with the S&P 500 index stalling as it approaches the 2,100 level (an area of overhead supply) and the TSX at the current downward sloping 200-day moving average level. Given this backdrop, equity markets will likely remain rather range-bound and higher levels of volatility will persist in the coming quarters. Indeed, a continued global economic recovery and more robust corporate earnings will be needed for a more meaningful advance in equity prices.

In Stan Wong Managed Portfolios, we prefer large-cap, high-quality North American companies with strong balance sheets, reliable earnings streams and positive growth attributes. Currently, client portfolios are positioned cautiously with above-average levels of cash as we take a very tactical and nimble approach (as always) to stock selection. We continue to survey the market to take advantage of near-term pricing opportunities (both on the buy and sell side). Using a baseball analogy, we suggest investors look for singles and doubles rather than home runs given the unsteady market environment.