Ryan Bushell, CEO and portfolio manager, Newhaven Asset Management
FOCUS: Canadian dividend stocks
Top Picks: Brookfield Infrastructure Partners, Arc Resources, NFI Group
MARKET OUTLOOK:
The market turned positive recently, driven by better-than-feared tech earnings and signs of trade war de-escalation. However, given ongoing political and policy uncertainty, we remain cautious. Real-time economic data, particularly from transportation companies, suggests a long-overdue slowdown.
The situation remains fluid, especially with the current U.S. administration’s tendency for overstatements, reversals, and conflicting signals, often within days.
From a broader perspective, we see two emerging, interconnected themes:
- A global geopolitical and economic rebalancing, with the U.S. losing its dominance.
- A rotation from intangible assets (notably U.S. mega cap tech) to tangible assets such as commodities (including gold) and infrastructure.
We expect this shift to unfold in a choppy fashion over time and are not making hasty moves. Over the past few years, we’ve built significant positions in utility and energy infrastructure companies offering attractive dividend yields. Currently, we’re letting cash from dividends accumulate and may add to industrials (e.g., railways) and consumer discretionary stocks as valuations become more attractive.
- Market-moving news, fast: Get the BNN Bloomberg App now
- Sign up for the Market Call Top Picks newsletter at bnnbloomberg.ca/subscribe
TOP PICKS:
Brookfield Infrastructure (BIP.UN TSX)
Brookfield Infrastructure Partners remains an attractive investment opportunity, especially for Canadians with space in their TFSA or RRSP. The 5.75 per cent distribution yield on the partnership units is very attractive when compared with the common that trades at more than a 25 per cent premium. Recently the company has front loaded divestitures which reinforce confidence in its $5-$6 billion acquisition and divestiture program and we believe the company’s unique asset profile combined with the management expertise are worth owning. In the meantime, investors collect a meaningful return on their investment through the distribution alone which has been growing at greater than five per cent per year.
Arc Resources (ARX TSX)
To be clear this is not a one-year selection. The larger themes at play point to more Canadian oil egress coming in the 2030’s which will require condensate to flow the heavy oil. Additionally, natural gas prices and volumes are set to firm up with LNG Canada entering service later this year with more LNG projects likely on the horizon as well. Arc Resources is well positioned to capitalize on these two larger picture themes and be able to survive a downturn in crude oil prices that seems to be underway. Purchases under the $25 level will likely look attractive on a longer-term basis.
NFI Group (NFI TSX)
With the seat supply issue (hopefully) resolved and the tariff overhang abating we think NFI is extremely well positioned to finally deliver results in 2025-26. Backlog is robust and orders continue to pour in as there is very limited competition following years of supply chain and political issues for the space. We have stuck with this company through a rough period and purchased most of our shares below the $12 level, we look forward to coming out the other side of this extended trough.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| BIP.UN TSX | Y | Y | Y |
| ARX TSX | Y | Y | Y |
| NFI TSX | Y | Y | Y |
PAST PICKS: May 24, 2024
Telus (T TSX)
- Then: $22.22
- Now: $20.87
- Return: -6%
- Total Return: 1%
Brookfield Renewable (BEP.UN TSX)
- Then: $39.23
- Now: $30.98
- Return: -21%
- Total Return: -16%
Savaria (SIS TSX)
- Then: $17.73
- Now: $18.00
- Return: 2%
- Total Return: 5%
Total Return Average: -3%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| T TSX | Y | Y | Y |
| BET.UN TSX | Y | Y | Y |
| SIS TSX | Y | Y | Y |
