Michael Sprung is president of Sprung Investment Management Inc.
Suncor Energy Inc.
Suncor is Canada’s largest integrated oil and gas company. Its upstream activities include extensive oil sands operations and core conventional business in eastern Canada, the North Sea, Africa, the Middle East and South America. Downstream operations include four refineries as well as some 1,600 retail locations. Suncor is undervalued given its growing cash flow and potential for significant growth over the next few years.
George Weston Ltd.
Weston is Canada’s largest food retailer through its majority ownership of Loblaws and a major provider of fresh and frozen bakery goods in North America. Loblaws continues initiatives to enhance productivity and should start to reap benefits as the new SAP system rolls out next year. In order to counter input cost pressures, Weston Foods is exercising cost-control measures. In our opinion, the current valuation indicates that investors are underestimating the underlying strength of Weston given its strong balance sheet.
Since problems surfaced following the Seacliff acquisition, CUQ’s stock has been severely punished. As the legacy contracts in general contracting that created the problems are completed, margins will start to improve. Backlogs in industrial services are at all-time highs. Under new management, there will be a sharp focus on improving profitability.
Past picks: Nov. 25, 2011
Canadian Imperial Bank of Commerce
Total return: +20.79 per cent
Cenovus Energy Inc.
Total return: +17.56 per cent
Total return: +4.66 per cent
Total return average: +14.34 per cent
Investors are almost paralyzed by the uncertainty resulting from the political stalemate in dealing with the fiscal imbalance in the U.S., a deepening recession in Europe, growing turmoil in the Middle East and fear of a slowing economy in China. Until the end of the year, tax-loss selling and profit taking will cause further drag on the market – hopefully offset by the occasional release of some positive economic data. This volatility will provide opportunities to purchase exposure to good-quality companies at reasonable valuations for those with the cash to seize those occasions.