Rob Lauzon, chief investment officer at Middlefield Capital Corporation

FOCUS: Global and North American Equities

MARKET OUTLOOK:

The index of leading economic indicators increased in February for the first time since early 2022, while the index of coincident economic indicators is up 1.9 per cent year-over-year, confirming real gross domestic product (GDP) growth and our view that the economy is experiencing a “soft landing.”

Front-page news highlights momentum and crowding in a handful of stocks. However, under the surface, lots of new leadership is emerging in healthcare, financials, energy, select utilities and REITs (real estate investment trusts). Also worth highlighting is that we are detecting a broadening out in the technology sector; IBM is a notable example. These trends are resulting in a cyclical and structural rebound in mergers and acquisitions (M&A) and we believe a multi-year cycle is upon us. Global M&A announcements are tracking more than 31 per cent over this time last year. Moreover, recent data also suggests the window is opening for both equity financings and IPOs (initial public offerings). With interest rates set to recede in the near term, we expect both institutional and retail money to flow out of short-term cash instruments and into equity income sectors and monthly equity income funds and ETFs.

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TOP PICKS:

Intellia Therapeutics (NTLA NASD)

After sluggish performance in biotech for over the past two years, funds are flowing back into the sector.  Gene-editing technologies are extremely promising, offering highly targeted and potentially curative treatments for a wide range of diseases. Intellia utilizes CRISPR technology to target specific genetic mutations with high precision with the goal of treating a variety of human diseases in the future. The company has more than US$1 billion of cash on balance sheet, which is enough to cover two years of operating expenses.

Dream Residential REIT (DRR.UN TSX)

The REIT owns garden-style complexes, which target middle-income households as renters. Demographics are favourable in their Sunbelt and Midwest target markets, such as Cincinnati, where they are repositioning units. We feel the REIT is mispriced trading above a 30 per cent discount to NAV, pays a healthy yield, which is backed by a 65 per cent payout ratio.

Topaz Energy (TPZ TSX)

Topaz gives investors a unique way to invest in the Canadian energy market. It has royalties on both oil and gas production as well as infrastructure. It collects royalties from some of the most exciting plays in the basin and from some of the highest-quality producers.  We feel there is deep value associated with their assets, which should be realized for patient investors. 

PAST PICKS: SEPTEMBER 1, 2023

Chartwell Retirement Residences (CSH.UN TSX)

Then: $10.54
Now: $12.28
Return: 16 per cent
Total Return: 20 per cent

Medtronic (MDT NYSE)

Then: US$82.13
Now: US$82.97
Return: 1 per cent
Total Return: 3 per cent

Enbridge (ENB TSX)

Then: $48.28
Now: $48.38
Return: 0.2 per cent
Total Return: 4 per cent

Total Return Average: 9 per cent