Market participants are becoming more cognizant of the possible negative economic outcomes surrounding many of the political and geopolitical issues facing the world today. As a result market volatility is increasing as speculators bounce between risk-on and risk-off stances. Investors’ concerns are very much centered around the ongoing international trade negotiations and the impact that they may have on future economic growth prospects.
The uncertainty regarding the positive and negative consequences of changes to trading patterns will cause investors to focus more on the fundamental drivers of the companies in which they invest in order to minimized downside risk. Investors should continue to seek well financed, well managed companies that are selling at attractive price levels.
Bank of Nova Scotia, BNS-T, Owned personally and by clients, Last purchase September 2016 $69.85
The Bank of Nova Scotia is the most international of the Canadian banks with branches in the Caribbean, Central and South America. Loan growth in the Latin American markets has been robust. While exposed to Mexico (6% of profits), the future of NAFTA could be of some concern but to date there has not been any apparent deterioration in credit quality. Given BNS’s geographic footprint, operations are in areas sensitive to commodity prices that have recently exhibited higher levels of volatility. The current yield of 4.2% is attractive as are the relative valuation parameters to its peers.
Canadian Natural Resources Ltd., CNQ-T, Owned personally and by clients, Last purchase August 2015 $25.54
Canadian Natural resources is one of Canada’s leading senior producers of oil and gas. CNQ is one of the best managed and best capitalized companies in the energy sector with a diversified base of long life assets. As such, CNQ has weathered the seismic swings in energy prices and has a strong balance sheet that enables management to take advantage of opportunities. The dividend yield is 2.7%.
George Weston Ltd., Owned by clients, Last purchase January 9, 2015 $96.88
Weston’s operates fresh and frozen bakery operations in the US and Canada and food distribution through Loblaws; Canada’s leading food retailer. Bakery volumes have been depressed as management is in the process of rationalizing product offerings and optimizing production processes. Weston’s ownership of Loblaws has been creeping up to the 50% level as share buybacks in the market have reduced the float. Weston has a strong balance sheet. The current dividend yield is 1.8%. From time to time, Weston has been known to pay a special dividend.
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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.