Prakash Hariharan is a Portfolio Manager with Front Street Capital.
Top Picks: Talison Lithium Talison is a producer of Lithium concentrate and is now looking to build a minerals conversion plant as well in Australia. It counts as one of the largest producers of lithium concentrate in the world, with a huge export market to China -- the biggest consumer of lithium for its battery applications.
The stock has pulled back due to some delayed shipments of products and will be interesting after the bottlenecks are removed. Lithium prices have been ramping up recently with price increases across the board mainly due to a demand pull before supplies come on stream. As an actual producer, the company offers good value.
GasFrac 7 per cent Convertible Note 02/17/2017 The company offers a unique technology by using LPG/Hydrocarbons as a fracturing medium for extractions from tight oil formations. The process enhances economics for extraction and has been actively tested in tight oil formations in the Marcellus, Viking and Cardium zones. GasFrac is well positioned to execute in emerging plays like the Eagleford. The stock was under pressure for most of last year after a propane flash incident, but the company is on track to post a revenue ramp in 2012. Convertible notes offer a good value and yield at these levels.
Ford Credit Canada 7.5 per cent 2015 This is a credit turnaround story after a series of operating success, particularly in Asia, after the credit-led auto crisis in 2008. Ford has stood out from the Big 3 in terms of products, franchise, access to markets and strong management focus. Corporate bonds offer good value at these levels as the credit turnaround gains momentum. Expect to see some refinancings and asset securitizations to offer better cost of capital, which should augment credit metrics further. Its liquidity position has also significantly improved since the credit crunch in 2008.
Past Picks: March 9, 2011
CF Industries Then: $126.53 Now: $192.10 Total return: +53.01 per cent
Sherritt 8.25 per cent Bond 24/10/2014 Total return: +6.10 per cent
Wi-LAN Then: $5.73 Now: $5.25 Total return: -6.87 per cent
Total Return Average: +17.41 per cent
OUTLOOK The credit situation in Europe has been showing signs of improvement, as the spreads of Italian and Spanish government bonds to German sovereign debt has compressed since December. The purchases of sovereign debt by the Italian and Spanish banks has played a big part to assuage fears of a credit freeze, thanks to the "Sarkozy effect" of offering low cost of capital. Positive sentiment has received a boost from strong US economic data as well, so a recovery appears to be leading the equity markets to rally.
The defensives have been overbought by yield-hungry investors, and as M&A gains traction across various sectors from construction, infrastructure, energy to technology, growth-oriented equities offer compelling valuations.
Compiled by Franklin Cameron, BNN Market Call Tonight