The great challenge: Donville VS Penetrator

Have you read the last ROE reporter? It's been released on thursday and it's excellent, once again.

The january edition is the most interesting of the year because Jason Donville presents his approach: High ROE/low PE ratio stocks, like he does every year. Also, Jason states that even if the TSX is mainly based on natural resources and, to a lesser extent, financials (for a lot of people, investing in Canada means investing in one of the big banks or in Suncor), there's some great stocks out there in the knowledge sector (healthcare and technology) which deserve attention.

As always, at the end of the ROE reporter, there's a list of stocks and Donville presents his 5 top picks for the year ahead.

For 2016, his faith goes to his usual picks:

CGI Group
Home Capital Group
Concordia Healthcare
Constellation Software
CRH Medical

The first four names represent more than 30% of my portfolio. So, I believe in them too, obviously.

This year, I'll try to prove myself by playing the game against Donville (and against all the others analysts I'm talking about from time to time). So, I'm gonna chose 7 stocks that I believe will get good results for the year ahead (5 serious picks and 2 long shots). A substantial part of my portfolio is made of US equities. Would it be fair to chose some US equities against a 100% canadian equities portfolio? I don't know. The canadian dollar is so low that it may not be such an unfair approach. In fact, the canadian dollar should rise sooner or later, which would reduce the performance of all US equities. So, I've decided to chose one US listed company.

I think that Donville chosed pretty good stocks and I'd chose most of them too. But I'll try to be original and chose something else.

Here's my choices for 2016.

1- Canadian Pacific
2- Valeant
3- Knight Therapeutics
4- Couche-Tard
5- Allergan (US listed)

Long shots:

6- Ten Peaks Cofee (TPK.TO)
7- Rifco  (RFC.V)

I'm betting on cash full companies such as Knight Therapeutics and CGI Group (even if I didn't chose that last one because Donville chose it first). The market is low and there's plenty of occasions out there, so companies with lots of cash may jump on the occasion to buy something cheap. Cheap companies might as well be bought (Concordia Healthcare, Callidus Capital, Home Capital Group, Nobilis Health, etc).

I'll surely write a review at the end of 2016 or the beginning of 2017.

If you're interested to participate, please use the comment section to write your 5 picks for 2016.