Top on BNN today

Market Call Tonight:
Paul Gardner, Partner & Portfolio Manager, Avenue Investment Management

FOCUS: Fixed income, Large Cap dividend paying stocks & REITs

Market Outlook: The current weakness in the stock markets gives a long term equity holder a chance to buy stocks on the cheap. With earnings yields around nine percent and bond yields around 2.5 percent, the compelling argument is to buy the equity market. The buying of companies with conservative balance sheets and high cash flow is still favoured over less conservative - higher risk stocks.

TOP PICKS:

• Mainstreet Equity Corp. (MEQ TSX) This real estate company buys apartment buildings in Alberta mostly, and then repositions the units for better marketability. Net migration into the province is helping vacancy rates fall and rents to go up. It trades cheap to its NAV.
• Bank of America (BAC NYSE) This iconic bank is the largest depositor in the country. Both its investment banking arm and retail business are making positive returns. Although it’s still dealing with a weak housing market, the bank’s shares should outperform and should trade closer to its historical P/E over the next few years.
• Aecon Convertible, 7.0% 2014 Given the minimal amount of debt on Aecon’s balance sheet, its convertible bonds yield 6.5 percent with very little risk taken. We assume that this investment’s return will come from the coupon since the conversion rate is too far out of the money.