How some investment dealers are playing their hands in 2011

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National Bank Financial

Outlook for the indexes:

S&P/TSX: 14,400 on an aggregate 4Q EPS of $855

S&P 500: 1,400 on an aggregate 4Q EPS of $97 (U.S.)

Sector or stock picks:

Overweight on the S&P/TSX: Energy Equipment & Services; Oil, Gas & Consumable Fuels; Containers & Packaging; Gold; Retailing; Pharmaceuticals, Biotechnology & Life Sciences; Software & Services.

Underweight on the S&P/TSX: Automobiles & Components; Consumer Services; Food & Staples Retailing; Food, Beverage & Tobacco; Insurance; Telecommunication Services; Utilities.

Quote:

"U.S. politicians did the right thing by giving medium-term priority to growth over deficit reduction. The last big weight was lifted from a fragile U.S. economy by Congress's vote to extend all of the Bush-era tax cuts. This move eliminates an apprehended drag on the economy from fiscal policy in 2011."

RBC Dominion Securities

Outlook for the indexes:

S&P/TSX earnings per share of $834

S&P 500 earnings per share of $88 (U.S.)

Sector or stock picks:

Overweight on the S&P/TSX: Consumer Discretionary, Energy, Telecom Services

Overweight on the S&P 500: Energy, Health Care, Information Technology

Underweight on the S&P/TSX: Consumer Staples, Industrials, Materials

Underweight on the S&P 500: Utilities, Telecom, Materials, Consumer Discretionary

Stocks added to the 2011 Focus List: Eldorado Gold Corp., Intact Financial Corp., Magna International Inc., Trican Well Service Ltd., Valeant Pharmaceuticals International Inc.

Quote:

"Large Canadian firms are facing an embarrassment of riches with profits rising at a double-digit pace, cash balances at all-time highs, improved access to financing and interest rates at very attractive levels."

TD Waterhouse Inc.

Outlook for the indexes:

S&P/TSX: "A high single-digit return."

S&P 500: "A low double-digit return."

Sector or stock picks:

PepsiCo and Johnson & Johnson should "provide good total returns" while Oracle, Microsoft, IBM, Cisco and HP "should do well as fears of a double-dip diminish." Large-capitalization financials, including Goldman Sachs and JPMorgan Chase & Co. should improve. The energy sector, particularly, Suncor and EnCana "should do much better in 2011." The whole group of Canadian banks "should have a good year," with Royal Bank and Bank of Nova Scotia the two top selections.

Quote:

The foremost sectoral concern is U.S. housing, with very high inventory levels and foreclosure rates. But "the best affordability in generations," half the normal number of new homes under construction, and slowly improving employment and consumer confidence all mean "we feel another sharp downturn in home prices is improbable and a slow, multiyear recovery in the sector will take place."

Scotia Capital:

Outlook for the indexes:

S&P 500 1,325 (a 12-18 month target) +12% in U.S. dollars in 2011

TSX 14,000 (a 12-18 month target) +8% in Canadian dollars in 2011

TSX earnings per share of $860

S&P 500 earnings per share $90

Sector or stock picks:

Overweight: Energy, Industrials, Technology

Underweight: Consumer Staples, Health Care, Telecom, Utilities

Quote:

"Investors have been through bouts of euphoria and despair in recent months and 2010's volatile equity climate could continue in 2011. Spain and Portugal could be the Euro spoilers next year and China's tightening intentions also threaten to dampen fragile risk appetite. In our opinion, the catalyst to sustained improvement in equity sentiment, i.e. a positive reversal in flows that would lift valuations, will materialize when the Fed talks about its exit strategy (rate hikes)."

UBS Securities

Outlook for the indexes:

TSX: 14,500

S&P 500: 1,325

Sector or stock picks:

Seven Canadian "key calls": Barrick Gold; Canadian Tire; Cenovus Energy; First Quantum Minerals; Onex; Quebecor; Royal Bank of Canada

U.S. sector overweights: Technology, Industrials, Health Care

U.S. sector underweights: Consumer Staples, Telecom, Utilities

Quote:

"The rejection of the bid for Potash Corp. was the most tangible sign of the re-emergence of political economy in Canada. Though it appears to be a unique situation, the implications include potentially lower valuations in the oil sands and other resource areas. The episode did trigger a re-examination of the rules, which will ultimately determine on what terms Canada will be 'open for business.' "

Special to The Globe and Mail