John O'Connell is chairman and CEO of Davis Rea. His focus is on North American large caps.
Top Picks:
Oracle Corp.
Good earnings and dividend growth potential with a strong balance sheet, with a management team that has demonstrated a strong ability to grow in adverse and competitive situations, both organically and through acquisitions.
Morguard North American Residential REIT
Yield is 5.5 per cent. This real estate investment trust is expanding in the United States, where cap rates are attractive and rents are firming. Management has a strong track record of creating value and owns over 50 per cent of the REIT.
Keyera Corp.
Great management team delivering consistent growth in a disciplined manner with major growth projects that it may pursue if the economics make sense. A strong infrastructure player that the oil and gas industry has come to rely upon.
Past Picks: Sept. 7, 2011
BCE Inc.
Then: $38.65
Now: $44.36
Total return: +20.92%
Intel Corp.
Then: $20.08
Now: $23.43
Total return: +20.52%
Oracle Corp.
Then: $27.63
Now: $32.57
Total return: +18.85%
Total Return Average: +20.10%
MARKET OUTLOOK
Presently, market participants are basking in the glow of recent central bank actions in Europe and reassuring words from the Fed. While we expect the rally may have some room to run, we expect markets to begin to focus on the challenging fiscal situation next year in America, the continued rolling restructuring of Europe and cyclical softness in the developing world. Equities are fairly priced but further rapid increases in valuation will present investors with increasingly questionable valuations given the Macro head winds that are anticipated next year. Increasing caution is warranted at this time and cash balances should be pursued.