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From automation to Bitcoin, Canadian investors see opportunity in 2021

Tue 22nd December, 2020 4:03pm
By Fergal Smith and Maiya Keidan
    TORONTO, Dec 21 (Reuters) - Canadian fund managers are
revamping their portfolios, picking cyclical stocks that could
benefit from a return to a more typical economy in the coming
year, as COVID-19 vaccines roll out and central banks provide a
historic level of stimulus.
    In Canada, which began doling out the Pfizer Inc  PFE.N  and
BioNTech SE  BNTX.O  vaccine on Dec. 14, cyclical stocks account
for about 70% of the country's main stock market. The S&P/TSX
Composite  .GSPTSE  has gained 2.6% this year, lagging the
tech-heavy U.S. market.*:nL1N2IV1M3
   "We have gotten away from that really narrow focused
leadership of large cap tech stocks and the work-from-home
companies, which really had benefited before from the pandemic
and the lockdowns," said Greg Taylor, a portfolio manager at
Purpose Investments. 
    "2021 could be a fantastic year for the rotation to
continue, for the cyclicals to do a lot better."
    Norman Levine, managing director at Portfolio Management
Corporation, has also shifted to a portfolio of potential
winners in a return to normalcy. 
    Levine's picks include Brookfield Property Partners LP
 BPY_u.TO , which owns a global portfolio of commercial real
estate, including hospitality and retail assets that have seen
    SLGI Asset Management played the work-from-home theme for
most of 2020 but recently rotated its portfolios more into
Canadian markets from an overweight U.S. position, said CIO
Sadiq Adatia. 
    "We think about things that will do well and we think
financials, we think metals and the mining and energy sector,"
he said. "People will be dying to get on vacation and maybe take
more than their normal share (of holidays) to make up for that
and that will require higher demand for energy."
    At Manulife Asset Management, senior portfolio manager Steve
Belisle said he is bullish on auto-parts manufacturer Magna
International Inc  MG.TO , expecting it to benefit from economic
recovery and the production of electric vehicle parts.
    Another cyclical stock Belisle owns is ATS Automation
Tooling Systems Inc  ATA.TO , which builds automated systems for
medical equipment manufacturing related to vaccine production.
    Supportive of economic recovery, major central banks,
including the Bank of Canada, have pledged to keep interest
rates at record lows over the coming years and continue with
quantitative easing.*:nL1N2IP1I7
    That has bolstered investor interest in digital currencies 
such as Bitcoin. The Bitcoin Fund  QBTC.TO  has soared 65% since
it began trading in Canadian dollars in October.
    "It's a hedge against all the money printing that is going
on," said Arthur Salzer, chief executive officer of Northland
Wealth Management, noting "institutional investors are
embracing" the asset class. 
    When it comes to Canada's own currency, Fiera Capital
Corporation  FSZ.TO  portfolio manager Candice Bangsund said the
downtrend in the U.S dollar should ultimately prop up the
Canadian dollar. 
    "Our expectation for a global economic acceleration and
corresponding strength in the commodity complex should be key
tailwinds for the loonie over the next 12 to 18 months," she
    A weaker U.S. dollar  .DXY , along with central bank
stimulus and the vaccine news, could also boost prospects for
resource stocks, say investors. Canada's energy sector  .SPTTEN 
has climbed 40% since the end of October.*:nL1N2IO1WA
    "It doesn't feel like supply is going to be as easy to come
on given some of the shutdowns within the U.S.," said Purpose’s
Greg Taylor, who favors "safer" natural gas names, including
Tourmaline Oil Corp  TOU.TO  and Arc Resources Ltd  ARX.TO , as
well as oil-price sensitive names, such as Whitecap Resources
Inc  WCP.TO  and Canadian Natural Resources LTD  CNQ.TO .
    "You could be setting up for a period where energy, from
both oil and natural gas, has the potential to go higher."

 (Reporting by Fergal Smith and Maiya Keidan; Editing by Steve
 ((; +1 647 480 7446;))
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