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Ford had problems early in 2014 as a result of weak car sales in the United States. (Fred Lum/The Globe and Mail)
Ford had problems early in 2014 as a result of weak car sales in the United States. (Fred Lum/The Globe and Mail)

Stock Picks

Six stocks poised for a spring upswing Add to ...

Canadian investors will soon emerge from their insulated cocoons, squinting at that unfamiliar glowing ball in the sky and scouring for stocks brutalized by a ruthless winter.

The cold winds blew briskly through boardrooms in the United States and Canada over the past few months. FactSet recently found that the word “weather” was mentioned in 195 conference calls of S&P 500 companies between Jan. 1 and March 12, marking an 81-per-cent increase over the prior year.

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“When you have ice storms and terrible weather, people don’t rush out and buy new cars and houses and appliances,” said Michael Decter, president of LDIC Inc. “I certainly think a lot of economic activity has been kicked ... to the second quarter.”

That should position many stocks well for a rally once warmer weather stimulates delayed business. We surveyed investment professionals for their top picks among stocks due for a spring bounce.

 

Don Vialoux

Research analyst, Horizons ETF Management Canada

Ford Motor Co. (F-NYSE)

Weakness in equity prices in colder-than-average years is normal and observable, Mr. Vialoux said. This year, that weakness came on “faster and was more intense than average.”

Ford is a good example of a stock that came under pressure early in the year as a result of weak new car sales in the U.S. “New car buyers delayed their typical spring buying season this year, but technical action by Ford’s stock shows that they already have started to return.”

Jim Huang

President, T.I.P. Wealth Manager

Starbucks Corp. (SBUX-Nasdaq)

It’s difficult to isolate the negative effects of the weather from the other forces that have weighed on stocks this winter, Mr. Huang said. “But the coming of spring would settle this debate.”

The retail sector is one obvious victim of the season. Starbucks saw its sales growth slow in the last quarter, and since the stock trades at a premium multiple, the penalty imposed by investors was magnified. “As warmer weather returns, sales growth should return to historical levels and so will the stock price.”

John Zechner

Chief executive, J. Zechner and Associates Inc.

Transat A.T. Inc. (TRZ.B-TSX)

While many Canadians doubtlessly wanted nothing more than to flee this frozen wasteland for warmer climes, the falling loonie was a disincentive to travel and adverse weather made for a rough first quarter for airline stocks. The currency swing also squeezed profitability at airlines and tour operators such as Transat, which have most of their expenses in U.S. currency. So far this year, the stock has fallen by about 33 per cent.

“The next quarter will still be down but the third quarter is the big one for them,” Mr. Zechner said.

Michael Decter

President, LDIC Inc.

International Forest

Products Ltd. (IFP.A-TSX)Canadian lumber stocks tend to be heavily influenced by the U.S. housing market, which went into a weather-related pause this winter. “We think there have been delays in housing construction, which have, in turn, delayed demand for lumber products,” Mr. Decter said.

Interfor stock has declined by about 9 per cent over the past few weeks. “We think it has good cyclical growth and may also have a good upside surprise over the next couple of quarters as the wood gets moving.”

Bruce Campbell

Portfolio manager, at StoneCastle Investment Management Inc.

TransForce Inc. (TFI-TSX)

Treacherous road conditions made for a rough winter for transportation companies. TransForce posted a big earnings miss in the fourth quarter, interrupting a stock run that saw TransForce’s share price rise by 30 per cent since May. The company should get back on that trajectory in the spring, Mr. Campbell said.

“They have seen significant earnings increases over the last few years and I think that trend continues.”

Peter Brieger

Managing director, GlobeInvest Capital Management Inc.

Canfor Corp. (CFP-TSX)

Canfor’s business has been disrupted by a strike by truckers at Port Metro Vancouver, but the 10-per-cent dip the company’s stock has taken since early March is a product of the winter, Mr. Brieger said.

“The dip is entirely due to weather and disappointing housing numbers.” Spring should see a lift in housing activity and a resulting boost for Canfor, he said.

 

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Spring bounce stock picks

CompanySymbolRecent
Price
($)
Price
chg
from
seasonal
peak
(%)
1-yr
total
return
(%)
P/E
Ratio
Market
Cap
($-bil)
Ford Motor Co.F-N15.53-7.220.39.9761.218
Starbucks Corp.SBUX-Q77.44-1.837.316.5958.476
Transat A.T. Inc.TRZ.B-T8.83-32.653.75.590.337
Int'l Forest Products Ltd.IFP.A-T16.69-8.758.722.861.110
TransForce Inc.TFI-T23.64-7.013.224.622.359
Canfor Corp.CFP-T27.20-9.924.616.483.763

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