John Zechner is chairman of J. Zechner Associates. His focus is on North American large caps.
There is strong growth ahead in four core areas of industrial leasing. The company is currently well-capitalized and somewhat under-levered and should be able to show exceptional earnings growth over next few years. The management team has been together in prior similar business.
I believe that uranium prices will move above $60 (U.S.) a pound over next few years from $34 today. There are tightening supplies from reduced future projects due to higher costs and fewer sources of secondary supply. Demand is expected to grow strongly from China as they increase nuclear capacity. Japan may also re-start some newer reactors in 2014 and recent elections may help in that regard.
Quebecor’s Videotron unit could be set to become the ‘de facto 4th player’ in the Canadian wireless market. It could become the consolidator of some of the smaller players as well as a buyer in upcoming spectrum auction. The company also starting to move to stronger free cash flow generation yet has a cash flow multiple lower than the rest of the industry.
Past Picks: FEBRUARY 1, 2013
Crescent Point Energy
Then: $38.80; Now: $38.14; Total return: +5.56%
Then: $32.10; Now: $21.32; Total return: -32.11%
Then: $58.13; Now: $110.09; Total return: +91.73%
Total return average: +21.73%
We continue to see stocks as the best asset class for total return in 2014. The U.S. economic recovery continues, Europe has seen its lows, Japan has restructured for growth and the emerging economies still have longer-term growth at superior rates. All of this should support earnings growth for globally-oriented companies. Stock valuations are still attractive versus bonds despite the gains in 2013. Future stock gains will be driven primarily by earnings growth, which we expect to rise about 10 per cent. Although interest rates are starting to rise, they are expected to remain relatively low, which should still support higher stock valuations. Investors are nervously selling off stocks in early 2014 on worries about emerging markets, but we view this as an expected correction and are using the weakness to add to stock positions in the following sectors of the Canadian and U.S. markets: financials, technology, industrials, energy and basic materials.
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