Michael Simpson, senior portfolio manager at Sentry Select.
Michael Simpson is vice-president and senior portfolio manager of Sentry Investments. His focus is on dividend paying stocks.
Top Picks:
Chemtrade Logistics
Chemtrade Logistics is one of the world's largest suppliers of sulfuric acid liquid, sulfur dioxide and a leading supplier of sodium chlorate and water treatment chemicals. It recently purchased Marsulex, which was an accretive acquisition. it trades at about 7 times EV/EBITDA with a 60 per cent dividend payout ratio and a 7.9 per cent yield.
Canadian Helicopter Group
CHL helicopter has one of the largest helicopter fleets in the world, providing transportation services in Canada and several other countries. It provides services to the mining infrastructure, utilities, government and oil and gas sector trades It trades under 5 times EV/EBITDA, 8 times earnings, and has a debt-to-cash-flow ratio of 0.6 times.
Deere & Co.
Deere is the largest manufacturer and distributor of agricultural equipment worldwide, with leading market share in agriculture and turf and forestry and construction. Strong return on equity of 41% and return on invested capital of 16% generates free cash flow, which is used to pay dividends and buy back shares. Good growth opportunities in Russia and Latin America.
Past Picks: March 4, 2011
Intact Financial
Then: $48.85
Now: $61.64
Total return: +30.60%
Wal-Mart
Then: $52.07
Now: $60.06
Total return: +19.32%
K-Bro Linen
Then: $20.73
Now: $22.76
Total return: +13.60%
Total Return Average: +21.17%
MARKET OUTLOOK
After a strong start to the year, markets look to be pulling back from their recent highs. Recent earnings reports showed that 68 per cent of S&P 500 companies beat earnings expectations, while 31% of companies missed their earnings numbers. However, earnings growth is clearly slowing.
Year over year the S&P 500 companies grew earnings at 5.4% while on a quarter over quarter basis earnings grew 0.17%. The European macro situation is coming back to attention. The unemployment rate in Spain is close to 24% and youth unemployment in Spain is close to 50%. Spanish 10-year bond yields are approaching 6% and the cost of insuring Spanish bonds through credit default swaps has increased.
Against this backdrop we still see positive world GDP growth, primarily led by Asia and the United States. Lower commodity prices will help strengthen and sustain the economic recovery. In anticipation of a market pullback, we raised cash levels.
Compiled by Franklin Cameron, BNN Market Call Tonight
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