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Three top stock picks from Morgan Meighen’s Michael Smedley

Michael Smedley.

Fred Lum/The Globe and Mail

Michael Smedley is executive vice-president and chief investment officer at Morgan Meighen & Associates. His focus is on Canadian equities.

Top Picks:

CI Financial Corp. (CIX TSX)

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One of the largest of the independent fund and investments managers has now been released from what I would describe in a sense as "captivity" by one of the major banks. This is a game changer and probably provides a sense of relief inside CI. The group has been doing remarkably well in the face of fierce competition and pays good dividends. Bought personally in October, 2013 at $33.60.

DH Corp. (DH TSX)

I have recommended this in the past year and it is working out, rising consistently over the months as it completes the transitioning from what everybody knows was a curiously lingering bank check-based business, defying all odds. The new age is here for DH, formerly Davis + Henderson, with a doubling of revenues based on a new business by acquisitions – the lending processing and technology solutions for the banking industry across North America. The stock was bought by me and in the fund at $26 last year.

BioSyent (RX TSX)

This one of the specialty pharma group in Canada, one of the least known and covered by no analysts to my knowledge. It is not to be ignored but is growing with a small team of seasoned executives out of big pharma companies acquiring the local marketing of seasoned global products. It is up about 65 per cent since acquired by me and the fund nearly a year ago. Note that it has probably been aided by the general high interest in the Canadian pharma marketing sector. It is for investors who like steady progress not the dash on the wild side.

Past Picks: July 18, 2013

George Weston (WN TSX)

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Then: $85.04; Now: $78.74 -7.41%; Total return: -5.97%

Cipher Pharmaceuticals (DND TSX)

Then: $5.92; Now: $7.70 +30.07%; Total return: +30.07%

First Majestic Silver (FR TSX)

Then: $12.55; Now: $9.18 -26.85%; Total return: -26.85%

Total return average: -2.91%

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Disclosure:

Personal

Family

Portfolio/Fund

WN

Y

N

N

DND

Y

N

N

FR

Y

N

N


Market outlook:

I anticipate no major change in the coming months. I never feel convinced about anything general, but closest to certainty is that volumes in trading should remain low, interesting stock deals will continue. Slightly rising interest rates not yet in the cards might bother the market even less than they did last year, reducing the extent of corrections to dividend stocks. This would be sensible. I could also say that some of the corrections in sectors are not of major concern. Small cap specializations will always correct after big runs but will always respond to their inevitable big growth content. I note for example that U.S. fund performance tables published in the business press this week show that health and biotech, and science and technology stocks of all levels of market cap stay the best performers over one year. Interestingly, resources mainly in the oil and gas segments have been winners over one year. Now, I glimpse a selective improvement in the mining camp and I think that will continue and expand.

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