Rationale: The oil refiner trades at a deep discount to both its historical valuation multiples and net asset value. Estimates for earnings per share have largely been discounted. The company will profit if West Texas Intermediate crude oil weakens relative to Brent. HollyFrontier pays a modest dividend, and an analyst price target of $39 suggests a possible increase of more than 70 per cent.
Pick: ING Groep NV
Brian Pinchuk, Analyst, Lorne Steinberg Wealth Management Inc., Montreal
Rationale: The Dutch financial-services company has proven well managed and highly profitable amid this year’s market turbulence. Its exposure to Portugal, Ireland, Italy, Greece and Spain is relatively low. Plans to reduce debt, cut costs and spin off assets will reduce its complexity and risk profile. ING will remain a top-tier financial-services company and at 0.4 times tangible book value, it is compellingly cheap.
Pick: iShares Russell 2000 Growth Index Fund
Peter Hodson, Chief Executive Officer, 5i Research Inc. and Editor, Canadian MoneySaver Magazine, Kitchener, Ont.
Rationale: No one expects economic growth to accelerate or growth stocks to do well. But growth stocks are incredibly cheap, have huge beta in a rising market, and it would take only the slightest bit of good economic news to send them on a tear. If the market does well, this ETF could easily rise 30 per cent or more. The rest of the world is buying all bonds, all the time, and there may be a bubble. Management fees are low.
Pick: Magna International Inc.
Gail Bebee, Author of No Hype – The Straight Goods on Investing Your Money, Toronto
Rationale: The supplier of auto parts has the capability to expand where markets are growing. The stock price is cheap relative to earnings and book value. The company no longer has the overhang of dual-class shares. It has a decent dividend, low payout ratio, manageable debt and lots of cash. Sales and earnings per share are rising. Any positive earnings surprises should be well rewarded.
Pick: MI Developments Inc.
Jim Huang, President and Portfolio Manager, T.I.P. Wealth Manager Inc., Toronto
Rationale: The real-estate-investment trust and landlord of Magna International Inc. aims to become a diversified industrial REIT. It has an under-leveraged balance sheet and potential to raise its dividend payout, improve its property mix and enhance share value. With a current yield around 6.6 per cent, it certainly pays to wait for the strategy to be executed. I expect the stock to reach $45 to $50 in the next 12 months.
Pick: Poseidon Concepts Corp.
Sheryl Purdy, Vice-President and Investment Adviser, Leede Financial Markets Inc., Calgary
Rationale: I am most bullish on the maker of swimming-pool-sized portable storage tanks for the oil and gas industry because of the growth trajectory ahead. One year ago, they had manufactured 25 units. They expect to enter 2012 with 240 units and a 90 per cent utilization rate. The bonus is that they have begun to pay a monthly dividend, so this stock offers growth and yield.
Pick: Retrocom Mid-Market Real Estate Investment Trust
Yarith Chhiv, Portfolio Manager, Palos Management Inc., Montreal
Rationale: This open-ended real-estate-investment trust is an attractive, sustainable, high-yielding dividend stock. As income-oriented investors hold the shares for the payout, they benefit from the REIT’s growth prospects and important support from SmartCentres Inc., a developer and operator of shopping plazas.
Pick: SPDR S&P Regional Banking ETF
Philip Pearlman, Executive Editor, StockTwits, Montebello, New York
Rationale: Many readers will think it’s crazy to suggest a financial ETF. At some point, though, banks will outperform again and often it is when a sector is so disliked that it finally bottoms out. I like the regional banks ETF because many of the component companies are cleaner than the money-centre banks. I want to buy KRE during periods of weakness and write covered calls against it into strength.
Pick: Research In Motion Ltd.
Steven Palmer, President and Chief Investment Officer, AlphaNorth Asset Management, Toronto
Rationale: Despite recent disappointments and earnings downgrades at the BlackBerry maker, the consensus earnings estimate for 2012 is $3 per share. RIM’s price-to-earnings multiple is among the lowest on the Toronto Stock Exchange. It has no debt and lots of cash. It is hard to imagine sentiment getting any more negative, and any glimmer of hope could result in significant stock gains.
Pick: Research In Motion Ltd.
Malvin Spooner, President, Sienna Capital Management Inc., Blogger, www.maverickinvestors.com, Author, A Maverick Investor’s Guidebook, Toronto
Rationale: My philosophy has always been: when everyone has sold a stock, the only thing that can happen next is someone buys it. What’s the catalyst? I don’t care! The BlackBerry maker has lots of cash and receivables, so no wonder scavenger hedge funds have beaten down the stock and hope to get a massively successful business on the cheap.