Pessimism is overdone for financial stocks: Leith Wheeler

Bill Dye says Canadian banks and insurers are fundamentally strong.

Michael Ryval 7 January, 2016 | 6:00PM
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Canadian financial-services stocks took a hit in 2015, yet the view going forward is not so bleak, provided you have a longer-term horizon, says Bill Dye, head of Canadian equities at Vancouver-based Leith Wheeler Investment Counsel Ltd.

"There's certainly a lot of pessimism priced into Canadian financials. But these things are levered plays on the Canadian economy, to some extent," says Dye, who is on the team that oversees the $2.2-billion 4-star rated Leith Wheeler Canadian Equity. "In the short term, it depends on one's view of the Canadian economy, and the fact that oil is trading at US$35 is quite concerning. The real issue is: Is Canada going into recession? We don't think it is. But it is certainly a risk."

Dye admits that 2016 will be a tough year and GDP growth will be around 1%. "We'll be moving ahead, but very slowly. And we won't be seeing much inflation in this environment." Indeed, given the slow pace of growth, Dye believes there is a 50-50 chance of the Bank of Canada cutting interest rates again.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Manulife Financial Corp24.51 CAD2.21Rating
Royal Bank of Canada128.15 CAD1.38Rating
The Toronto-Dominion Bank83.19 CAD1.20Rating

About Author

Michael Ryval

Michael Ryval  Michael Ryval, a regular contributor to Morningstar, is a Toronto-based freelance writer who specializes in business and investing.

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