Looking for Zombies in a Red Market


The market is down and then down again and now it seems that everything is  turning red, right? Even on Twitter, people are quick to remind us about the worst Mondays in history:

Source: OddStats

Now that we have this wind of panic on the market, it seems that everything you will buy will turn into a zombie. Once again, media is quickly reminding us many reasons for selling:

  • Trade war with China,
  • Interest rate increasing,
  • High household debt ratio,
  • Ridiculously high household debt ratio (Canadian),
  • Canadian housing market slowing down,
  • NAFTA negotiations going sideways,
  • Oil stocks are high, oil companies must go down (again?),
  • We are at the top of a bullish market (it must go down),
  • That’s a gloomy moment on the stock market, it seems that everybody is about to die, and this will be the apocalypse.

I found 100 survivors!

Honestly, I don’t really mind if my portfolio is up or down. I don’t mind because I have faith in my investing strategy and it has been proven right over the past 6 years.  However, I can understand that many of you are freaking out right now. Nobody wants to pick a lose and see it bleed in your portfolio, I get that.

For this reason, I’ve gone through the market and tried to find companies that are showing momentum. While the market is dropping like a rock, those companies are popping like flowers during spring time (Ugh, we just got more snow this Sunday!).

When I pulled out my screener, I looked for dividend paying companies (1%+) with a dividend growth policy in place (positive 5 years dividend growth) and… double-digit return in 2018 (as of April 6th 2018). I found exactly 100 of them (keep reading, you’ll get the full list!). But I thought of present you my favorite 3 first.

Source: ycharts

03 Andrew Peller (ADW.A.TO)

I’m cheating a bit with this one since Andrew Peller doesn’t pay a 1%+ yield anymore. What’s wrong with Andrew Peller? Nothing besides the fact the stock jumped by 66% over the past 12 months. ADW’s momentum hasn’t been slowed down this year as it is currently up by 17.5% ytd.

The company is Canadian’s largest wine retailer. I’ve discussed ADW a few months ago to my DSR members when I purchased some shares for my pension account (I’m up 52% for the record). I like this company because it is a dominant player in a highly fragmented market. ADW estimates owing 14% share of total volume of the wine market and a 37% share of total volume of the domestic wine market.

Andrew Peller manages several well-known brands and keeps growing through acquisition. Back in October 2017, it purchased 3 BC wineries (Black Hills, Gray Monk & Tinhorn Creek) for $95M. While its dividend yield is low, the company increases it by double-digit on a regular basis. Hurry-up as the next dividend increase of 10% has been announced for June 2018.

02 Canadian Tire (CTC.TO)

Who said that retailers are dead? Surprisingly, in the 100 list of survivors, you will find names like Target (TGT) and Macy’s (M). I honestly think this will not be a sustainable rhythm for them. On the other side, I’m not surprised to find Canadian Tire among the surviving warriors.

CTC has 2 major advantages that help it compete against the “Amazon disruption”. First, the company owns several exclusive brands like Motomaster and Mastercraft. Canadian Tire benefits from a strong bond with Canadians and they are looking for those brands.

Second, Canadian Tire also offers a wide range of large items. It is a little bit harder to ship tires or fishing boats and remain competitive for online stores. Canadian Tires can easily sell their stuff online and arrange pick-up at their stores. The company also owns its real estate that was spun-off to create additional value under the ticker CRT.UN (CT REIT).

01 Gentex (GNTX)

This is one of my favorite “under the radar” companies. Gentex dominates its main market (auto-diming mirrors) with a whooping 92% market share. In other words; nobody does auto-timing mirrors besides Gentex. The beauty in this market is that only 25% of cars offer this feature. This will be a growing market in the upcoming years as car safety is a growing concern.

Going forward, Gentex has developed SMARTBEAM that automatically shifts from high beam to low beam while crossing another vehicle. This technology is used in Europe but hasn’t been promoted in North America yet.

Finally, GNTX is also making auto-diming windows! This is being used for airplanes to increase passengers comfort. This is another way that GNTX will be able to use its patented technology to grow in the future. Management increased its dividend again by another 10% a couple months ago.

Do you want the 100 list? Here it is!

This Friday, I’ll send the full list to all Dividend Guy’s blog newsletter subscribers. If you haven’t subscribed yet, all you need to do is to enter you email here and your will be on the list for Friday’s sending.

I hope you will find a few good stock picks out of those survivor’s!

Disclaimer: I’m long ATD.A.TO, GNTX, CTC.TO

The post Looking for Zombies in a Red Market appeared first on The Dividend Guy Blog.

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