David Baskin.Moe Doiron/The Globe and Mail
David Baskin is president of Baskin Financial Services. His focus is on North American large caps.
Top picks:
Home Capital Group Inc.
Home Capital is a superbly managed mortgage lender with a return on equity of 25 per cent, a growth rate that is twice that of the banks, and a bargain-basement stock price. We expect the company to earn more than $7 in 2013, putting the current P:E ratio at about 8 times. The dividend will likely continue to rise every year.
H&R REIT
H&R will expand its operations into retail malls with the deal to purchase assets from Primaris Retail Real Estate Investment Trust. The deal should be accretive to cash flow and distributions going forward. With the pricing on other high dividend payers now extended and vulnerable to any upward movement in interest rates, large REITs offer the best alternative for income seekers.
Apple Inc.
The controversy over whether Apple can grow at past rates misses the forest for the trees. With cash equal to one-third of its market cap, Apple trades at about seven or eight times likely earnings for 2013. The company has scope to buy back an enormous number of shares, radically increase the dividend or pay a special dividend. We see very little downside at this price.
Past picks: March 29, 2012
Keyera Corp.
Then: $41.25
Now: $54.11
Total return: +36.26 per cent
Magna International Inc.
Then: $47.57
Now: $54.99
Total return: +17.79 per cent
SNC-Lavalin Group Inc.
Then: $39.86
Now: $48.91
Total return: +25.54 per cent
Total return average: 26.53 per cent
Market outlook: The recent gains in both Canadian and U.S. markets have brought prices back to levels last seen before the 2008 crash, and have caused some to predict a pull-back. In our view the market remains attractive due to the high level of corporate earnings and the low yields offered in fixed income. While we do not expect to see a sharp increase in interest rates in the short term, the risk/reward in fixed income securities is very unfavourable. Economically sensitive sectors should be favoured at this time.