Rick Stuchberry is senior vice-president and portfolio manager at Richardson GMP. His focus is on Canadian large caps and international ADRs.
Potash Corp. is a one-of-a-kind resource. Its capital spent on mine expansion is mostly in the past. This relief on capital spent will be enough to support margins at current prices. The washout has occurred; we don't expect potash prices to fall further, and in the event that the oligopoly is put back into place, we would expect it to move higher.
This is one of mainland Europe's largest banks. It was never bailed out, and was on an acquiring spree in 2008-9. It is now diversified between emerging and developed markets. Also, it practices traditional banking and has stable earnings, as it will not need to write down any significant assets in Spain, and will take part in the European recovery. Lastly, it has a 7-per-cent dividend that made it through the European crisis, and we expect that dividend to continue and possibly grow as Europe continues to stabilize.
The U.S. auto maker has de-levered its balance sheet. It was not bailed out as was the case for GM and Chrysler. It continues to reduce its pension liabilities, it is growing strongly in the U.S., it is turning a profit in the emerging markets, and its European operations are beginning to recover. We like the +2-per-cent dividend when we are holding a growth stock.
Past Picks: December 13, 2012
Total return: +13.16 per cent
Southern Copper Corp.
Total return: -30.62 per cent
Total return: -14.48 per cent
Total return average: -10.66 per cent
When we look back to the greatest bull market in history – the 1982-2000 bull market – we had the same disbelief in the market breakout. Waiting for a pullback or opportunity to invest never occurred, and ironically there were similarities in that Volker was using experimental Fed policy at the time to stop inflation. When the Dow broke through 1,000, there was no looking back, and at that time, a bond market capable of absorbing capital existed. We see the breakout as the start of a long-term secular bull market. Capital will have no other place to go but the stock market, and money flows have yet to begin entering the equity markets. The chart below highlights money flows over the last 5 years; the bond market has received more than 1 trillion in inflows, and conversely, the equity market experienced an outflow of almost 400 billion. This reversal will provide fuel for the fire for a lot longer than most believe.
(Mobile users click here to see chart.)