Barry Schwartz is vice president and portfolio manager with Baskin Financial Services. His focus is on North American Large Cap stocks.
Market outlook
It is reckless to assume that the current weakness in the global economy will result in a weak stock market. Any sign of economic re-acceleration could jolt stock markets higher given undemanding valuations. We are closely watching the recovery in the U.S. housing sector, and the direction of that recovery is more important for your portfolio than what is happening with European bond yields.
As always, we recommend that investors stay fully invested and own a diversified portfolio of companies that have low valuations and a history of raising dividends over time. Cyclical and commodity related sectors definitely offer extremely low valuations, and numerous opportunities can be found in the following sectors: U.S. technology, U.S. financials, U.S. healthcare, auto manufacturers as well as oil and base metal producers. Nevertheless, volatile markets require that you limit your exposure to any one sector.
Past picks: August 11, 2011
High Liner Foods
Then: $15.53
Now: $19.50
TR: +28.54 per cent
BCE Inc.
Then: $37.79
Now: $42.85
TR: +19.47 per cent
Fortis Inc.
Then: $31.21
Now: $33.40
TR: +9.92 per cent
Total Return Average: +19.31 per cent
Top picks:
JPMorgan Chase
Bought on Friday at $35.78
The world's most profitable bank is currently valued at a 30 per cent discount to the Canadian banks on earnings and a 60 per cent discount based on book value. JP Morgan is overcapitalized and recently raised its dividend by 20 per cent. As soon as it gets regulatory approval, JPM may institute a large share buyback program.
Algoma Central
Bought last week at $115
Algoma owns and operates a diverse collection of assets, including Canada's largest domestic fleet of shipping vessels. Algoma ships dry bulk commodities such as iron ore, construction materials and coal, which should benefit the company as the North American economy rebounds. It trades at a deep discount to its railway peers and it has raised its dividend 100 per cent since 2004.
Morguard Corp
Bought last week at $90
Morguard is a diversified real estate holding company with assets in Canada and the U.S. including significant stakes in two publicly traded REIT's. We believe that Morguard's stock is trading at a 40 per cent discount to its net asset value. Recently, the company has been actively buying back its shares.
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