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Peter Hodson, CEO & Head of Research, 5I Research FOCUS: Canadian Small and Mid-Cap Stocks Market outlook: In our career, we have sometimes been accused of being 'overly bullish'. But we would take that moniker over 'irrational' any day. The past two months have been ridiculous in terms of investor fear, volatility, panic and irrationality. Companies' fortunes do not change 50 percent overnight but you would never know it by stock movements, with the healthcare sector getting crushed on one political comment, and the energy sector surging on a small movement in crude. It seems investors are shifting back and forth among sectors with total disregard to portfolio construction. Take a deep breath everyone: interest rates are low and maybe staying low for longer. Corporate earnings are decent. Dividends are being raised and companies are being taken over at good premiums. We just had the largest ever takeover of a tech company in EMC. The credit market is fine, and the end of the world is not coming. China can slow its growth rate but its impact on North American profits is far less than you might think. If you build a diversified portfolio all of the rest is just noise that will hurt your portfolio if you 'react' to it. Institutions need to swing sectors around because the TSX continues to be mostly financials and energy (more than 50 percent in two sectors). Individuals do not need to follow such foolish sector weightings. If you have more than 20 percent in any one sector you are betting, not investing. Top Picks Alimentation Couche-Tard (ATDb.TO) Knight Therapeutics (GUD.TO) Scotiabank (BNS.TO) Click here for more information on Peter Hodson's top and past picks |