Paul Gardner is a partner and portfolio manager at Avenue Investment Management. His focus is on fixed income, large cap dividend paying stocks and REITs.
Top picks:
Sherrit
Our continued past pick is a favourite due to a conservative balance sheet and especially now that the execution risk for building Ambitovy is now gone. Credit agency has rated this as a high yield, credit metrics show a A low bond.
Davis+Henderson
Recent acquisitions have been accretive. Yield is attractive at 6.5 per cent. A unique story that offers reasonable growth and defensive characteristics. U.S. acquisitions have been accretive, with now only 40 per cent of revenue comes from cheque producing.
Microsoft
Company trades at a cheap 10x P/E and has potential for outperformance due to it whole new lineup of Windows 8, Office 2013, and the Surface. $7 of cash on balance sheet and possible outperformance due to new product launches should give Microsoft momentum.
Past picks (August 10, 2011):
Mainstreet Equity Corp.
Then: $17.42
Now: $32.89
Total return: +88.81%
Bank of America
Then: $6.77
Now: $8.16
Total return: +21.30%
Aecon Convertible
Total return: 12%
Total return average: +40.70%
Market outlook
The market is in a midst of a seasonal summer rally. Volatility is low and risk assets are being prices higher. When the market comes back from vacation it will have to "deal" with the European debt crisis and upcoming US election. Volatility will trend higher and once again dividend paying companies will continue to be in vogue due to very low interest rates.