Equity analysts at RBC Dominion Securities Inc. are joining the parade of investment dealers offering their best stock selections for next year. Canada’s largest bank has one of the longest stock pick lists around: 30 companies deemed likely to outperform in 2013.
This is the first year the bank has made a list of global picks. Last year it had featured 17 favoured equities from the U.S. Those selections had an average return of 21.7 per cent, easily outperforming the market, suggesting the bank’s analysts have some mojo in the stock picking department and are worth paying attention to.
The bank culled the names for its best performers from among the 1,500 companies its analysts cover in Canada, the U.S., the UK and Europe. The analysts were told to offer their “best money-making ideas in absolute terms using a risk-adjusted approach.” The only restriction was that they had to pick larger-sized companies with market capitalization of at least $2-billion and a minimum of $20-million in daily trading value, stocks that would be suitable for a global institutional investor.
Before getting into the actual best ideas, here is a short summary of what the global economic environment looks like in the bank’s crystal ball. Growth will have a “small improvement” over the course of the year, with a weaker first half giving way to a stronger last half. While many analysts spent this year fretting that Europe would blow up economically, the bank figures there will be diminished risk in 2013 out of the euro zone.
Given that inflation should remain muted, the bank believes that monetary authorities will be able to engage in further unconventional and conventional monetary easing should the need arise, which should also reduce risks.
In this environment, the bank’s analysts have selected a few themes that do well. The first is the recovery in housing in the U.S.
“Companies with exposure to an ongoing improvement in the U.S. housing market should deliver above average growth and visibility,” RBC said. Among the pick in this sector are:
- USG Corp.
- Sherwin Williams
- PNC Financial Services
- Wolseley PLC
Energy underperformed this year, but RBC analysts believe there are “attractive investment opportunities with high quality operators and established track records.” Among them it selected the following stocks in the exploration and production sector as having “compelling” prospects, and also Cameron in the oilfields services sector:
- Concho Resources
- Statoil ASA
- Tullow Oil
- Cameron International
Global economic recovery will benefit a diverse group of industrial and transportation companies. Best positioned are:
- Schneider Electric
- Precision Castparts
- Magna International
- Ryder Systems
- Philips Electronics
Rounding out the picks:
- Brookfield Asset Management
- CBS Corp.
- Clean Harbors
- Discover Financial Services
- Dollarama Inc.
- GAM Holdings AG
- Hologic Inc.
- Host Hotels & Resorts
- Prudential Financial
- SBA Communications
- Silver Wheaton
- Swedbank AB
- TD Bank
- Telus Corp.
- Travelers Companies
- Valeant Pharmaceuticals International
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- USG Corp$24.92-1.12(-4.30%)
- Sherwin-Williams Co$280.32-3.43(-1.21%)
- PNC Financial Services Group Inc$77.88-3.20(-3.95%)
- Concho Resources Inc$115.48-5.58(-4.61%)
- Statoil ASA$15.70-0.46(-2.85%)
- Magna International Inc$44.00-3.03(-6.44%)
- Transforce Inc$22.75-0.76(-3.23%)
- Koninklijke Philips NV$23.29-1.02(-4.20%)
- Brookfield Asset Management Inc$41.98-0.94(-2.19%)
- CBS Corp$50.89-0.76(-1.47%)
- Clean Harbors Inc$49.01-2.17(-4.24%)
- Discover Financial Services$50.71-1.08(-2.09%)
- Dollarama Inc$88.02-1.32(-1.48%)
- Hologic Inc$32.93-1.18(-3.46%)
- Host Hotels & Resorts Inc$14.79-0.91(-5.80%)
- Prudential Financial Inc$66.93-3.98(-5.61%)
- SBA Communications Corp$100.98-2.33(-2.26%)
- Silver Wheaton Corp$28.75+1.06(+3.83%)
- Toronto-Dominion Bank$54.51-0.73(-1.32%)
- Telus Corp$41.05+0.11(+0.27%)
- Travelers Companies Inc$110.35-0.67(-0.60%)
- Valeant Pharmaceuticals International Inc$24.50-1.86(-7.06%)
- Updated June 27 4:00 PM EDT. Delayed by at least 15 minutes.