Darren Sissons is managing director of Portfolio Management Corp. His focus is on global large caps.
Reasons to buy include: 1) the 4.75-per-cent dividend yield; 2) a good balance sheet; 3) attractive pricing due to the Gulf of Mexico oil spill liability, which is well-provisioned and will be finalized by year end; 4) the BP-TNK (Russian) joint venture, with an $8-billion cost base, was recently sold for $28-billion and the lion’s share rolled into Rosneft to continue exposure to Russian oil reserves; and 5) the portfolio has been re-jigged to focus on high-impact exploration.
BHP Billiton Ltd.
Reasons to buy include: 1) the 3.6-per-cent dividend yield; 2) a strong balance sheet; 3) BHP is tied to China’s modernization efforts through its iron ore and copper exposure; 4) it’s inexpensive by historical standards; and 5) commodity companies tend to do well in an inflationary environment, which we don’t have yet but will eventually.
Tsingtao Brewing Co.
Reasons to buy include: 1) a modest dividend; 2) ta rack record of sales growth at two times China’s GDP growth rate, which is forecasted for 2013 at 8 per cent; 3) a strong balance sheet; 4) it’s inexpensive by historical standards as Chinese assets were generally on sale last year due to overly pessimistic expectations for that country’s GDP growth rate moving forward; and 5) it provides corporate governance comfort as the main listing is in Hong Kong and major shareholders include the Qingdao provincial government and Japanese brewing giant Asahi Group, which own 30 per cent and 20 per cent, respectively.
Past picks: Jan. 30, 2012
Total return: +2.15 per cent
Total return: +21.36 per cent
Then: KR 434
Now: KR 576
Total return: +34.32 per cent
Total return average: +19.28 per cent
The markets started well this year, like they typically always do. The run won’t last and it will likely lose steam post the conclusion of the RRSP-401K seasons. The U.S. will continue grinding higher but news headlines and a poor political environment will support continuing market volatility in the U.S. Europe is now taking the medicine required to fix its ailing economy. Banks must be recapitalized, austerity programs have been introduced and taxes will rise so companies with euro zone exposure will see a decline in earnings over the near term. Growth will continue across Asia but will be modestly weaker than in prior years as the region’s major trading partners are either recovering from or declining into recession. Canada is likely to see flat to lower commodity prices but this weakness will be somewhat offset by opportunities created by a continuing U.S. recovery. Latin America is growing but inflation and government interference are still major problems.
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