Q2 2017 Watch List

After purchasing shares in four companies during the first quarter of 2017, it’s time to identify which companies I am contemplating investing in this quarter.  Since my investment portfolio consists of my unregistered account, my TFSA, and RRSP, that will be the format in which I present my considerations.

Unregistered Account

I continue to look for an opportunity to complete my position in Emera (TSE: EMA), but am in no rush to do that given it’s up over 5% in the last month without any material changes to the company. I am interested in Aecon Group (TSE: ARE) as they would provide me exposure to the construction sector and also have a history of growing their dividends. Although the current P/E of 25X is a tad rich based on historical standards, any weakness in the share price would make this company quite attractive.  Lastly, I have been considering selling my shares in Corus Entertainment (TSE: CJR.B), waiting at least 31 days, and then buying them back. The tax loss this would create for me would be lucrative given I am running out of tax losses to apply to capital gains.

TFSA

Although not particularly cheap given past and peer valuations, I will likely add a small number of shares of TD Bank (TSE: TD) that has a trailing P/E of 13.8X. As mentioned in previous posts, part of my plan for 2017 is to add to positions in which I am comfortable. Given the recent weakness in TD’s share price due to media reports of their aggressive sales practices, I feel this is an opportunity to bolster my position in my favorite Canadian bank. The other security I would consider adding in my TFSA and RRSP is Brookfield Infrastructure Partners L.P. (TSE: BIP.UN).   Although I feel late to the party on this company, when I looked at it from a P/FFO perspective (vs a P/E valuation), I see a much more reasonably priced company than I first figured. Their record of dividend growth is outstanding, as is there record of accreditive acquisitions.

RRSP

Beyond BIP.UN, the most likely purchase in my RRSP during Q2 will be more shares of Tanger Factory Outlook (NYSE: SKT).  I hope the valuation stays below a P/FFO of 15X (about 13X currently) so that I can add to this well managed discount mall REIT.   In accordance with my plan to add to positions that I feel very comfortable in, I will likely make a small purchase of A&W Income Fund (TSE: AW.UN). This restaurant chain has reported impressive same-store-sales growth over the last two years, and I like their plans to add more restaurants in urban areas during the next five years. Lastly, I have been considering exiting my Kinder Morgan position (NYSE: KMI). The combination of a low Canadian dollar compared to the US dollar, stagnant oil prices, and the realization that I’m overexposed to the pipeline sector through my other Canadian holdings (TRP, ENB, ENF) have me considering moving on from Kinder.

As always, my watch list companies can change as events unfold, but the above encompasses what I am considering at the start of the second quarter of 2017. From a contrarian perspective, I am considering initiating a short-term position in Home Capital Group (TSE: HCG). When asking myself what's the worst that could happen due to OSC allegations of slow disclosure regarding unscrupulous mortgage brokers, I think the most likely outcome for Home Capital is paying some fines and possibly dismissing their current CFO. With shares selling at 6 times 2016 earnings, the company has an appealing short-term risk/return profile. 

Which companies appear at the top of your watch list for Q217?