Stan Wong is vice-president and portfolio manager of Macquarie Private Wealth. His focus is on North American large caps and exchange traded funds.
Home Depot is the world's largest home improvement retailer with over 2,200 stores in North America and a growing presence in Mexico and China. Near-term, Home Depot shares should benefit from the rebuilding efforts due to the devastating effects of Superstorm Sandy. Longer term, the improving housing market should lift the stock as well. Favourable trends such as the aging of homes and prolonged low interest rates should also continue to support demand for renovation and remodelling. With an expected 15 per cent long-term annual earnings growth rate, Home Depot shares provide investors with a solid growth opportunity.
With one of the world's most recognizable brands, General Electric sells products ranging from jet engines and gas turbines to consumer appliances, locomotives and medical equipment. Improving performance and visibility at its GE Capital division along with its more cyclical, high margin businesses GE Aviation and GE Energy should benefit the stock. As well, GE's attractive dividend yield of 3 per cent is projected to grow by an annualized rate of over 15 per cent over the next three years.
Joy Global is a global manufacturer of surface and underground mining equipment. The outlook for mining equipment is positive as the global economy continues to improve and global stimulus policies persist. Trading at a 9x forward price-earnings multiple (near a decade low), Joy Global shares are undervalued and very compelling given its expected 15 to 17 per cent long-term annual earnings growth rate.
Past picks: Nov. 24, 2011
Total return: +14.77 per cent
Mondelez International (Spun out Kraft Foods)
Total return: +20.96 per cent
TR: -0.71 per cent
Total return average: +11.67 per cent
After a strong summer, stock market momentum has faded a bit in recent weeks. Weaker than expected earnings reports from several high profile blue chip companies along with jitters about the U.S. election has stalled equity markets of late. However, recent economic data points have been firm with employment and housing numbers gaining traction. With the uncertainty of the U.S. election over and anxiety over Europe's problems calming, we believe that equities are well-positioned to resume its grind higher over the near-term. As well, policy makers around the world remain accommodative and inflation risks are not yet significant. In our portfolios, we are rotating part of our equity component away from defensive stocks into more cyclical stocks on price opportunities and seasonality factors. U.S. equities continued to be preferred over Canadian equities given the relative strength and greater breadth of the U.S. markets.