Darren Sissons is Managing Director at Portfolio Management Corp. His focus is Global large caps.
Top Picks:
BankUnited - fund and family ownership; last purchase $35.39/share (U.S.).
- i) sustainable 2.6-per-cent dividend yield,
- ii) extremely strong balance sheet and no liquidity issues expected,
- iii) leveraged to a recovering Florida and to growth in the New York market,
- iv) like all banks it will benefit from rising interest rates, and
- v) despite the recent share price movement is still attractively priced.
Paychex - fund ownership; last purchase $28.23/share (U.S.).
- i) a growing dividend currently yielding 3.2 per cent,
- ii) strong balance sheet,
- iii) leveraged to a recovery in unemployment in the small-medium sized business segment,
- iv) given the large payroll float will benefit from rising interest rates, and
- v) expect continued tuck-in acquisitions.
Tsingtao Brewing - last purchase $6.08/share (U.S.).
- i) sustainable 1-per-cent dividend yield,
- ii) solid balance sheet,
- iii) leveraged to the increasing wealth of the Chinese population,
- iv) recently signed joint ventures with Japanese beverage giants Asahi and Suntory, and
- v) good crops yields for barley in 2013 imply lower brewing costs in 2014, which should positively impact earnings. Tsingtao trades in China, Hong Kong and in the U.S. under TSGTF and TSGTY.
Past Picks: January 23, 2014
BP PLC
Then: $44.27; Now: $47.41; Total return: +12.59 per cent
BHP Billiton Ltd.
Then: $77.88; Now: $64.32; Total return: -14.63 per cent
Tsingtao Brewing
Then: HK $46.25; Now: HK $56.95; Total return: +24.25%
Total return average: +7.40 per cent
Market outlook:
2014 promises to be an interesting year. In 2013, investors with international exposure saw returns in the 30-per-cent range or better. While I expect international markets to continue outperforming the Canadian market, my return expectations for 2014 are generally modest.
In the U.S., investors are now chasing the American recovery story, and given anemic growth expectations of only 1.5 per cent to 2 per cent, they will likely end up with buyers' remorse. The easy money has been made in the U.S. and while growth-oriented companies enjoy premium valuations, the companies with defensive or slow growth characteristics are becoming increasingly miss-priced.
Europe is a similar story. Yes, it has hit bottom and the region has the necessary bruising associated with a hard crash landing. Like the U.S., growth and cyclicals look expensive but defensive companies, slow growth companies and companies with large emerging markets exposures are where the value lies.
Asia is the bright spot as it usually is only this time for a different reason. The influx of funds chasing U.S. and European assets are being supplied predominantly from the sale proceeds of fixed income and Asian equities. The implication is high quality, high-growth best of breed Asian companies are now on sale. In some cases, significantly so. The longer the investor love affair with U.S. and Europe continues the deeper Asian companies will be discounted.
Latin American continues to be buffeted by problems ranging from government interference, inflation, graft, lack of needed infrastructure and declining commodity prices. Given the above, we are staying away from Latin America until the hemorrhaging stops; we are actively adding Asian assets and selectively adding out of favour U.S. and European assets.