Michael Bowman.
Michael Bowman is executive vice-president and portfolio manager at Wickham Investment Counsel Inc. His focus is North American large caps and ETFs.
Top Picks:
Loblaw Cos. Ltd.
The company used to be a grocer but it is now a holding company with a REIT, other real estate assets, Shoppers Drug Mart, PC Financial Services, and Joe Fresh. The company's Enterprise value is only 38 per cent groceries. Loblaw has many moving parts and will remain competitive. PC Plus Loyalty program was only launched nationally last quarter and already has 4 million users who account for over 37 per cent of purchases. EPS last quarter was well above consensus. Joe Fresh is launching 700 stores inside JC Penney.
First Trust ISE Cloud Computing Index ETF
Cloud computing is a model for enabling convenient on-demand network access to a shared pool of configurable computing resources. The cloud offers low-cost computing power, business agility, storage, and collaboration among users and other benefits. The ETF holds salesforce.com, F5 networks, Juniper Networks, Zynga.
First Trust Large Cap Core AlphaDex ETF
Stocks from the S&P are ranked on growth factors including 3, 6, and 12 month price appreciation, sales-to-price, and one-year sales growth, and then also on value, like book value-to-price, cash flow-to-price, and return on assets. Stocks are then given a score and the ETF holds top rated growth and value companies. The ETF is rebalanced quarterly: 20 per cent consumer discretionary, 14 per cent industrials, 14 per cent information technology.
Past Picks: February 28, 2013
Select Sector Technology SPDR Fund
Then: $29.63; Now: $36.48; Total return: +25.47%
iShares Gold Bullion ETF
Then: $14.09; Now: $11.90; Total return: -15.45%
Consumer Staples Select ETF
Then: $38.09; Now: $42.55; Total return: +14.57%
Total return average: +8.20%
Market outlook:
I have grown very cautious on the stock markets and for those who have watched my BNN appearances, I don't ever recall saying that. Even though the bull continues to run, U.S. jobs growth missed expectations, retail sales and industrial production are weak, the U.S. housing recovery has been tripped up, and monetary stimulus is dying. There seems to be a disconnect between the equity markets and what is happening in the economy. In looking at market fundamentals, by many measures, stocks are more overvalued than at the 2007 high, and don't blame it on the weather.
In Canada, it seems that global demand for our goods and services is sharply declining. The rally in Canadian equities is not unexpected considering they have been in the doldrums for a couple of years, but I don't see it as a future forecaster.
In Europe, the recovery is quite lumpy and the unemployment rate may be in double digits for quite a while.
I am not finding the risk-verses-reward appealing right now as the market is rich and trading at above average valuations. After 20 per cent gains the past two years, the third year typically is low single digits. While I have every reason to be a market participant, stock and ETF selection will be the key going forward. Stocks and bonds will not be providing that free ride we have been on for the last 5 years.
We need to remember that long-term success can be destroyed by a short-term failure.