Its the official start of summer and things are starting to shake up. Plenty of news in the business and finance world to roil the markets – from Greece about to default, Puerto Rico announcing that it may not be able to repay its debt, Chinese market seeing a drop, and the list goes on. Amid these global turmoils, comes increased volatility in both the stock and bond markets and the central banks remain in focus to watch out for the investors. Amid these concerns, the risk of interest raise in 2015 keeps slipping to a later date and the gravy train continues. On the Canadian front, the risk of recession still looms with the oil market seeing major cutbacks during the first half of the year. Economists still expect interest rate cuts from the Bank of Canada to prop up the economy – and I will be looking forward to it as a consumer and investor.
Outlook for July 2015
In February, we started putting together an index-based ETF portfolio for my wife’s portfolio. In order to avoid buying at a market top, we started off with a modest amount of funds put to work. We will continue building our position over the course of the year. The portfolio details are shared here. As for my portfolio, I hold a decent amount of cash as discussed in my 2015 goals post. I am well above the 3-5% of cash position target to take advantage of market corrections.
Some of the stocks that I am keeping an eye on from my existing holdings:
- Magna International (MG.TO) is the most undervalued stock in my portfolio, although the stock price has seen quite a run-up in the last couple of months. The fundamentals are absolutely fantastic and this company is relatively unknown outside of Canada, unless you follow the automotive sector closely. I am tempted to add to my position in this automotive parts giant with a 5-yr DGR of 76%.
- Power Corp of Canada (POW.TO) is a financial conglomerate. While the main focus is insurance and asset management, the company invests in various other sectors of the economy such as utilities, media etc. The company announced its first dividend increase after six years in May 2015 with a 7.3% bump in dividends. I initiated a position after the announcement and will be looking to add further to this position. Details of this purchase shared here.
- Inter Pipeline Ltd (IPL.TO) is a pipeline company based in Alberta, which has seen some pressure lately. While the company held up really well in the oil downturn, the latest elections in Alberta resulted in the NDP party coming to power, who have indicated to raise minimum wages, income taxes and impose climate regulations, which are all negative for the industry. However, I am confident that the companies will adjust to the new norm and the stock is approaching an attractive valuation.
- The railroad industry is facing major headwinds, bringing the stock prices down to very attractive levels over the last few weeks. I am keeping a close eye on my holding – Canadian National Railway (CNR.TO) (CNI) and hope to average down on my cost basis. Read my dividend stock analysis of CN here.
- My tech holdings are also looking attractive and I am considering adding to my positions in Apple Inc (AAPL) and Qualcomm Inc (QCOM). Tech companies remain one of most cash-rich sectors, and have turned to stock buybacks as a method to return money to shareholders.
Possible new additions that I am looking at:
- I am looking to add another company in the insurance sector. Shortlist here includes Manulife Financial Corp (MFC), and Sun Life Financial Corp (SLF). I also had Chubb (CB) on my shortlist over the past few months, but it was just announced yesterday that ACE is making a move to acquire the insurance giant in a $28.3B deal, resulting in a stock price jump of ~27%. I have decided to drop this from my watchlist for now.
- In the food and beverage sector, my watchlist includes Tyson Foods (TSN), Coca Cola (KO), PepsiCo (PEP), and Starbucks (SBUX).
- In the industrial space, I am looking at Union Pacific Corp (UNP), Norfolk Southern (NSC), Raytheon (RTN) and General Dynamics (GD).
- Last month I sold my Utilities ETF and am looking to initiate a position in a dividend growing utility company. I still havent made up my mind on the company, but I shared some of my thoughts in this post with an overview of the utilities sector, and this post specifically on the water utilities sector. Some of the companies that stood out for me were: Southern Company (SO), Eversource Energy (ES), NextEra Energy (NEE), Canadian Utilities (CU.TO), American Water Works (AWK), and Aqua America (WTR).
I am expecting dividend increase announcements from the following companies in my portfolio.
- Kinder Morgan Inc (KMI) – last increase was 6.67% in April 2015
- Omega Healthcare Investors Inc (OHI) – last increase was 1.88% in April 2015
What are your thoughts on the stocks mentioned here? Do you own them or are they on your watchlist? What do you think of the current market levels and buying here? Make sure to leave a comment below as I value reading your questions and comments.
Photo Credit: Dennis Jarvis