A turnaround is expected in the pattern of the commodity prices and the Canadian stock market as a consequence of a high-probability scenario of sustained global economic expansion, and is one reason to favor an overweight position in Canadian equities, says Jean-Guy Desjardins, CFA, Chairman, Chief Executive Officer and Chief Investment Officer of Fiera Capital Corporation.
“And in fact, the Canadian economy, in terms of an activity point of view, is very much influenced by the behavior of the commodity prices. So if we are optimistic on the global economic outlook, then we are relatively positive on the outlook for commodity prices,” he said. “We have a view on the Canadian economy that it will do 2%, 2.5% growth, and that the Canadian dollar will be going up in line with the increase in the global commodity prices.”
Desjardins likes Dollarama Inc. (DOL.TO), a retailer that caters to the low end of the Canadian consumer segment. He says Dollarama’s segment of the Canadian retail market, contrary to the U.S., is extremely fragmented, and there is significant opportunity for that company to consolidate that market and to significantly increase its market share.
“The market opportunity is very attractive, and the management has proven in the past that they can execute on their strategy. So that’s a company that should be generating a substantial amount of free cash in the next two, three, four, five years, and it’s one that we think is a very effective buy,” Desjardins said.
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