Stan Wong is vice-president and portfolio manager of Macquarie Private Wealth. His focus is on North American large caps and exchange traded funds.
Top Picks:
Coca-Cola
With one of the world's most valuable brands, Coca-Cola shares provides investors with a reasonable long-term earnings growth rate along with a solid dividend yield of 2.7%. Coca Cola's dividend is projected to grow by an annualized rate of over 7% over the next three years. The recent pullback of this defensive and low beta consumer staples stock has provided a compelling buying opportunity in an uncertain market environment.
Dollar Tree
Dollar Tree Inc. is one of the largest operators of retail discount stores with over 4,300 stores in the U.S. and Canada. Dollar Tree is well positioned to benefit as consumers remain under pressure in a relatively weak macroeconomic environment. Trading at a 17x forward price-earnings multiple, Dollar Tree shares have an attractive long-term expected annual earnings growth forecast of 15-20%. The recent pullback of the stock has provided an attractive buying opportunity.
Barclays PLC
Barclays is a leading global universal bank and one of the world's largest by assets. Recent policy actions by the ECB are very positive for Barclays. As a result of the euro zone debt situation, Barclays shares currently trade at a distressed valuation relative to its expected earnings growth rate. If policymakers in Europe continue to take positive and timely action, Barclays shares should continue to rebound
Past Picks: Oct. 19, 2011
AT&T
Then: $29.09
Now: $38.03
Total return: +36.23%
Altria Group
Then: $27.32
Now: $33.64
Total return: +29.80%
Tiffany & Co.
Then: $71.16
Now: $63.87
Total return: -8.89%
Total Return Average: +19.05%
MARKET OUTLOOK
Near-term, equity markets continue to trade in overbought technical levels after rallying from the lows of the summer. While recent policy actions by the ECB help to temporarily stabilize the euro zone debt situation, the slowing economic growth in the U.S. and China remain as important headwinds for equity markets. As well, the looming fiscal cliff in the U.S. poses a critical threat if not resolved. In our view, equity markets could continue to grind higher but it will largely be determined by continuous and proactive actions of policymakers in China, Europe and the U.S. We continue to maintain a moderately defensive posture with an overweight in defensive, low beta, high dividend stocks but look to become more constructive on cyclical equities in the fourth quarter. We are also overweight U.S. equities over Canadian equities given the relative strength and greater breadth of the U.S. markets.
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