Bruce Campbell is president and portfolio manager of Campbell, Lee & Ross. His focus is on Canadian large caps.
Argonaut Gold (AR TSX)
Started new purchases in the past week at prices between $4.11-$4.22. Argonaut is a smaller gold producer with Mexican production, good growth in ounces with a good balance sheet and low cost. Q2 was slightly weak, providing the buying opportunity. An upcoming seasonally strong time and geopolitical tension means it is time to have a little portfolio insurance.
Paramount Resources (POU TSX)
A pullback of all gas stocks in the past 2 weeks provides a rare opportunity to buy Paramount. Bought last week at $56. Paramount will be a huge growth story over the next 2 years which is just beginning to ramp up now in its deep gas areas in Alberta.
Cineplex Inc. (CGX TSX)
Bought last week under $40. A much stronger slate of movies in Q3 will help drive good growth and the recent pullback provides the best entry point in quite a while. A 4-per-cent yield also helps to provide return with 8-10-per-cent earnings growth expected.
Past Picks: July 23, 2013
UnitedHealth Group (UNH NYSE)
Then: $72.69; Now: $85.06 +17.02%; Total return: +18.88%
Legacy Oil + Gas (LEG TSX)
Then: $6.24; Now: $8.54 +36.86%; Total return: +36.86%
Bank of Nova Scotia (BNS TSX)
Then: $58.35; Now: $72.81 +24.78%; Total return: +29.72%
Total return average: +28.49%
We have maintained all along that the Quantitative Easing unwind would occur slower than the consensus view. That has been correct, but it has happened even slower than we thought. The QE3 should wrap up by October after which there will be an observance period to see how the economy reacts. That period should last 6 to 12 months and assuming the economy can stand on its own two feet, then interest rates will start to rise. Here again we believe the operative word will be 'slowly'. A rising interest rate implies a stronger economy which is positive for equities.
The TSX is at or near all-time highs. The rise has been led by the materials sector, which was up 10 per cent in June, followed by information technology (+7.3 per cent), energy (+5.0 per cent) and industrials (+4.5 per cent). The benchmark has been up in eleven of the last twelve months, and was positive for the fourth straight quarter. U.S. equities were positive as well, with the S&P 500 up 1.9 per cent in June, and the Dow up 0.65 per cent. Bonds were also slightly positive, with the DEX bond universe up 0.25 per cent. We are pleased with how markets in Canada have acted thus far as worldwide, the Canadian market is one of the best performers of developed markets.
The 'sell in May and go away' seasonal investment strategy which we do not subscribe to, did not work again. We remain largely invested as the market has moved up smartly. We would describe our outlook as positive but cautious. Many have been expecting a correction in 2014 which hasn't come to fruition. We have not been in that camp, and although a minor retracement is to be expected after such a positive move in the first half of the year, we feel the market would treat this as a buying opportunity. Obviously our preference is for a 'time correction' which is defined as a largely sideways move. U.S. economic data is starting to improve, albeit slowly, and most signs are pointing to an improving U.S. economy and housing market. This was reinforced lately when it was announced the U.S. added 288 thousand jobs for the month of June, dropping the U.S. unemployment rate to a six year low.