Stan Wong is director of wealth management and portfolio manager at Stan Wong Private Wealth Management, ScotiaMcLeod. His focus is on North American large caps and ETFs.
Crescent Point Energy (CPG TSX)
Crescent Point Energy is a leading oil and gas exploration and production company with assets in the Western Canadian Sedimentary Basin. CPG is well managed and has grown by making solid accretive acquisitions. Production guidance for 2014 was also recently increased. In addition, energy prices will likely sustain their current levels, especially with geopolitical tensions playing a factor. Crescent Point currently yields a very attractive 6.1-per-cent dividend.
Michael Kors Holdings (KORS NYSE)
Michael Kors' recent stock price weakness presents an attractive buying opportunity. Michael Kors continues to gain market share in a growing global accessories market with a tiered pricing strategy spanning from value to high end consumers. With the U.S. market accounting for over 80 per cent of total company revenue, Michael Kors has plenty of opportunity ahead as it moves forward with its international expansion plans. As well, e-commerce appears to be a strong potential growth driver for the company. KORS trades at a forward-earnings multiple of 20x with a long-term expected earnings growth rate of 25 per cent; this gives the stock a PEG ratio valuation of only about 0.8x.
Financial Select Sector SPDR ETF (XLF NYSEARCA)
The Financial Select Sector SPDR ETF provides broad exposure to financial companies within the S&P 500. Top holdings include Wells Fargo, Berkshire Hathaway, JPMorgan Chase and Bank of America. The U.S. financial sector is trading at a valuation discount with a 1.35x price-to-book value (compared to 1.85x price-to-book value for the TSX financial sector). U.S. financials should continue to benefit from a strengthening U.S. economy, rising housing prices and lower loan loss provisions.
Past Picks: July 10, 2013
Telus (T TSX)
Then: $31.44; Now: $38.08 +21.12%; Total return: +25.86%
JPMorgan Chase & Co. (JPM NYSE)
Then: $54.83; Now: $59.00 +7.61%; Total return: +10.55%
iShares Short 20+ Year Treasury ETF (TBF NYSEARCA)
Then: $32.45; Now: $28.28 -12.85%; Total return: -12.85%
Total return average: +7.85%
Global economic growth appears to be strengthening, which should be favourable to continued advances in equity prices. Central bank policies remain accommodative and expectations are that positive earnings trends will allow North American equities to grow into their somewhat extended current valuations. However, in the near-term, geopolitical tensions have clearly been worsening, making stock markets vulnerable to a pullback. Recent low levels of volatility also suggest that investors are feeling rather complacent and not taking into account the possibility for bad news; indeed, there is no shortage of potential negative triggers for turbulence ahead. In our portfolio allocation, we have modestly raised cash levels to take advantage of any upcoming opportunities. We continue to favour more economically-sensitive cyclical stocks over defensive stocks. Of course, individual stock and sector selection remains paramount as the bull market matures.