Norman Levine is managing director of Portfolio Management Corp. His focus is on North American and global large caps.
Covidien is in the medical devices and medical supplies business. Its shares are suffering in comparison to its hospital-supply brethren due to the fact it is an American-run company incorporated in Ireland (for tax reasons) and is lumped together with European stocks for valuation purposes. It has class-leading top-line growth and its operating margins are expanding. We expect the spinoff of its generic pharmaceutical division in the first half of 2013. (Bought some time ago at $39.50.)
Callaway Golf Co.
Callaway is a turnaround story in the golf business. It has a new CEO (the former head of Adams Golf). He is refocusing and revamping the company’s product line, reducing head count, improving operational efficiencies, and cleaning up the balance sheet. We should see tangible evidence of the turnaround early in 2013. (Bought on Dec. 5 at $7.25.)
Deutsche Telekom AG
Deutsche Telecom, headquartered in fiscally conservative Germany, is inexpensive both compared to North American telcos and by historical standards. The proposed acquisition of MetroPCS in the US by its subsidiary T-Mobile will be very positive for the company. A dividend cut to a sustainable 5.6-per-cent yield has already been telegraphed. (Bought on Dec. 4 at €8.76.)
Past picks: Dec. 14, 2011
Half of our position was sold at $13.65 on Aug. 3, 2012
Total return: +15.15 per cent
Talisman Energy Inc.
Total return: –2.28 per cent
Total return: +40.38 per cent
Total Return Average: +17.75 per cent per cent
The “fiscal cliff” has many individual investors spooked. We believe some type of resolution will be reached either by the end of 2012 or in early 2013 and it would be a mistake to sell stocks out of fear. The U.S. economy is doing better than many expected due to a badly needed resurgence in the housing market and in auto sales. This bodes well for stock markets around the world and could finally cause interest rates to rise and bond prices to fall.
Follow us on Twitter: