Rick Stuchberry is a portfolio manager at Macquarie Private Wealth. His focus is on Canadian large caps and international ADRs.
Ford Motor Co.
This is a play on the negative outlook for energy and the recovering U.S. economy. Ford continues to clean up its balance sheet, produce smaller, cleaner cars and trucks, and recently doubled the dividend. Being paid 3 per cent to wait is a great situation for a growth investor.
Yum Brands Inc.
An investor with a longer term time horizon should do very well with this stock. Yum owns KFC, Pizza Hut, and Taco Bell fast-food restaurants. It is currently facing some headwinds with its China division, which we believe represents a buying opportunity for a long-term investor. Yum generates three-quarters of its revenue internationally and can be considered a U.S. company, with international growth opportunities.
It’s a luxury accessory company growing very rapidly in Asia; its total Chinese sales are growing at 40 per cent year over year. Coach’s products are sold with a 70-per-cent gross margin, it has a near-perfect balance sheet with net cash, and we think there is a high likelihood the company will raise the dividend this year.
Past picks: Feb. 28, 2012
Labrador Iron Ore Royalty
Total return: –0.38 per cent
Royal Canadian Mint
Total return: –11.17 per cent
Total return average: –3.85 per cent
Our global view continues to be bullish. The world’s developing economies continue to expand, led by China, which adds the economic equivalent of a Greece every 12 weeks. Our investments continue to target the economies with younger populations, growing GDP, infrastructure investment, and changing social structures resulting in new and growing middle classes. This new emerging markets middle class is what will give our portfolios the firepower to move higher in the years ahead. They will consume more than developed market consumers, and our goal is to position ourselves in stocks that participate in their growing consumption.
We expect the market to continue to “melt up,” as one negative issue after another is absorbed by the liquidity entering the market. It will not be an easy ride, but the constant influx of liquidity from the U.S. Federal Reserve, the unattractiveness of the bond markets, a steady stream of better economic news and the continuation of strong corporate profits will provide the markets with a “melt up” scenario as liquidity continues to enter the stock market instead of the bond market. We are a full 12 years into a difficult bear market and sentiment continues to be negative, but we are very close to entering a bull market. This bull market will be the first global bull market the world has ever experienced.
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