Ainsworth Lumber Co Ltd ANSBF

A top Portfolio Manager, Guest on BNN.

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Andy Nasr, Portfolio Manager, Middlefield Capital

FOCUS: Canadian Dividend Stocks and REITs

Market Outlook:

Long-term interest rates in the United States, Canada and many other developed economies have increased substantially since the end of May as market participants speculated that the Fed would ultimately slow its quantitative easing program, which consists of purchasing longer-dated Treasuries and mortgages to lower long-term borrowing costs. While we are encouraged by the economic growth in the U.S., we believe that the magnitude of the economic recovery will be gradual relative to previous cycles. Inflation remains tepid, unemployment remains elevated and low borrowing costs will be required to sustain an improvement in credit that has supported higher household formation and home prices. Previous economic expansions have historically been curtailed by tightening credit conditions, which were required to ease inflation as economic output edged towards its capacity constraints. Today, a premature tightening of monetary policy would substantially raise the risk of slowing economic growth in the U.S., especially since emerging market growth is lackluster and Europe remains mired in recession. While higher borrowing costs and interest expenses would reduce corporate cash flow, rising interest rates typically presage strong economic growth and inflation, which should allow well positioned companies to realize revenue and earnings growth as the economy expands. Our focus remains on global dividend paying issuers with relatively low leverage, good organic growth potential and strong management teams that have demonstrated an ability to prudently allocate capital

TOP PICKS:

Ainsworth Lumber (ANS TSX)
The company is a larger producer of value-added oriented standard board (OSB), with an attractive cost structure and good balance sheet. We expect the company to declare a dividend and believe that the shares will move higher as OSB prices increase due to a continued improvement U.S. single family housing starts.