Michael Sprung is president of Sprung Investment Management. His focus is on Canadian large caps.
EnerCare Solutions Inc. (ECI TSX)
EnerCare owns and rents water heaters in Ontario and manages a sub-metering business in Ontario, Alberta and elsewhere in Canada. Recently, management was disinclined to consider an offer in the $13.50 to $15.00 range from their largest shareholder just prior to announcing a complimentary and significant acquisition of Ontario Home Services from Direct Energy Marketing Limited. Concurrently, the company issued $310-million in equity to finance the purchase. The market capitalization will increase to well over $1-billion and the acquisition will substantially increase cash flow.
CAE Inc. (CAE TSX)
CAE provides simulation and modelling technologies primarily to the civil and military aviation industries. The company also offers integrated pilot training services around the globe. The company continues to win contracts in both markets and the stock is reasonably valued at current levels.
Encana Corp. (ECA TSX)
Encana is successfully transitioning from a natural gas firm to a more liquids-rich producer. Management has narrowed the focus of operations to five core areas. Acquisitions and divestitures have enriched the company beyond investors' expectations. We continue to recommend ECA.
Past Picks: July 22, 2013
CIBC (CM TSX)
Then: $77.49; Now: $100.95 +30.27%; Total return: +35.99%
Encana (ECA TSX)
Then: $18.03; Now: $23.85 +32.28%; Total return: +35.20%
Stuart Olson (SOX TSX) Previously: Churchill Corp. (CUQ TSX)
Then: $9.20; Now: $9.87 +7.28%; Total return: +12.51%
Total return average: +27.90%
While economic conditions have improved in North America and more recently in the emerging markets, equities in North America have had a very strong run over the past few years. It is getting more difficult in the current market to identify stocks with great value characteristics. In this environment, taking some profits where securities have had large appreciation may be prudent. A larger weighting in cash can provide a good option to be deployed should any market setback occur.