Michael Sprung is president of Sprung Investment Management. His focus is on Canadian large caps.
Royal Bank of Canada
The Royal Bank is Canada’s largest financial institution with extensive domestic banking and wealth networks as well as large global capital markets and global custody operations. Royal has a strong capital base and and earns a return on equity of around 18 per cent. Recent pressure on the stock has caused the price to pull back to attractive levels, with a current dividend yield of 4.2 per cent.
Goldcorp is one of North America’s largest gold companies with a number of promising development projects in the western hemisphere. Gold production is anticipated to increase dramatically over the next four years. The prices of gold producers have significantly reduced as the price of bullion has fallen over the past year. Goldcorp has a disciplined management team that will focus on cost control and returns on investment. At current prices, the stock offers good long-term prospects for price appreciation.
HudBay Minerals Inc.
HudBay Minerals is a major producer of zinc, copper and precious metals. With recent financing in place and several projects coming on stream in the near term, production levels will increase. The key is the company’s ability to finance the large Constancia project in Peru. Management is exploring several alternatives. With a number of development projects nearing production, the shares should react positively from the current depressed levels.
Past picks: June 10, 2012
Precision Drilling Corp.
Total return: +16.67 per cent
Barrick Gold Corp.
Total return: –48.16 per cent
Progressive Waste Solutions Ltd.
Total return: +24.18 per cent
Total return average: –2.44 per cent
Recent volatility in the global markets reflects the uncertainty surrounding the sustainability of the current economic recovery. The Canadian stock market has lagged the U.S., given our much larger exposure to commodities which have been under pressure. We expect this state of uncertainty will continue over the coming months. Investors should be prepared to take advantage of setbacks as they occur to position portfolios for the next business cycle.