Michael Bowman.
Michael Bowman is executive vice-president & portfolio manager, Wickham Investment Counsel. His focus is North American large caps & ETFs.
Top Picks:
Catamaran (CTRX NASDAQ/CTRX-O)
Last Purchase on Nov. 17, 2014 at $48.46
The company provides pharmacy benefit management services and healthcare information technology services. Third-quarter revenue rose 53 per cent driven by the new CIGNA contract. EBITDA has improved for three straight quarters demonstrating the company's ability to boost profitability while adding volume. New contracts and acquisitions will have a greater impact on growth than those of the larger peers. The CIGNA contract put pressure on margins due to implementation costs but profitability is now starting to improve. As volumes increase costs will decline. The company recently purchased Salveo, a specialty pharmacy benefit company and the deal was immediately accretive. Catamaran is the second largest publicly traded pharmacy benefit manager in the U.S., next to Express Scripts.
Greenbrier Companies (GBX NYSE/GBX.N)
Last Purchase on Nov. 17, 2014 at $62.15
The company makes rail cars. The backlog is at a record 42,900 freight and rail cars. The company is seeing a perfect storm as demand to ship oil from U.S. shale fields and to move bumper crops of grain keeps them scrambling to meet demand. Then add in the replacement market as new regulations require safer oil tank cars in Canada and the U.S. on a yet to be decided schedule. Backlogs are so big even a sustained period of lower oil prices won't cut into sales until 2016. The company has four business segments: design and manufacture rail and tank cars; repair and recondition wheel sets; providing lease and finance services; and providing software based services to manage rail car fleets. The company trades at a PE of just 14.6 projected 2015 EPS and the shares are down about 20 per cent due to the declining oil price.
First Trust AlphaDEX U.S. Consumer Staples Sector Index ETF (CAD Hedged) (FHC TSX/FHC.TO)
Last Purchase on Nov. 17, 2014 at $21.07
This is a new ETF from First Trust. Stocks are screened for growth (price momentum, sales growth, price to sales) and value (price to book, price to cash flow, return on assets) These companies are then given a score and the highest ones are over-weighted and the lowest are underweighted, and the process is duplicated quarterly. Food Products 41 per cent, Beverages 19 per cent, Staples retailing 18 per cent. The two largest positions are Kroger, which is a large grocery retailer, and Constellation Brands, makers of alcoholic beverages.
Past Picks: Nov. 27, 2013
EOG Resources (EOG NYSE) * Stock Split* April 1, 2014 – 2 for 1
Then; $166.43; Now: $97.65 +17.35%; Total return: +17.98%
Global X China Financials (CHIX NYSE)
Then; $14.17; Now: $13.30 -6.11%; Total return: -5.64%
Social Media ETF (SOCL NYSE)
Then: $19.34; Now: $19.09 -1.29%; Total return: -1.29%
Total return average: +3.68%
Market outlook:
Last week we saw that manufacturing sales in Canada rose 2.1 per cent after a 3.5-per-cent drop the previous month. In the U.S., retail sales are strong, the employment situation has greatly improved, and consumer confidence is off the scale at levels not seen in nearly a decade. Even the euro zone economy expanded in the third quarter, although growth was so weak that the European Central Bank is likely to launch more stimulus measures.
Equity prices have resumed their upward trend after a correction, and the cost of gasoline has tanked. Now that Q3 earnings are almost over, the average company's results have risen more than 10 per cent compared to last year.
OPEC is meeting on Nov. 27, which will greatly influence our Canadian resource sector. Speculation is that OPEC will cut production, firming up oil prices, which may set a floor under our energy equities. At this point it is still a rock, paper, scissors match between OPEC, the U.S., and Russia.
We are entering a historically bullish time of the year for equities, and coupled with the end of the U.S. mid-term elections, stocks should continue to move higher.