National Bank Financial analyst James Durran recalls that choosing stellar performing companies in 2009 required making broader economic calls rather than picking individual stocks.
"The economy was playing the primary role," said Mr. Durran, who was named the top analyst covering the retail sector in this year's StarMine analyst awards. "Typically, these stocks [retail]… tend to move up six months in advance of the bottom of the downturn in the economy."
He made a call in early 2009 to buy consumer discretionary stocks, expecting they would lift by mid-year with the market anticipating an economic bottom by December. Forzani Group Ltd. was his biggest winner with a gain of 139 per cent. But he downgraded grocery retailers to a "sell" or "hold" because he did not feel that rising food inflation, which was driving earnings growth, was sustainable.
This year, Mr. Durran expects the drivers for stock returns will be company specific. He is more upbeat on grocer names like Loblaw Cos. Ltd. and Empire Co. Ltd. because they are cheap. The more dormant consumer discretionary stocks have upside, but it will vary according to the firm, he said.
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