David Burrows is president and chief investment strategist at Barometer Capital Management. His focus is North American large caps.
Diamondback Energy (FANG NASDAQ)
Last bought June 10 at $82.99.
A growth producer of oil in the Permian Basin, Diamond Back will grow from 7000 BOEpd this year, to 25.4 K BOEpd by 2015. In addition, given the recent success of the Prairie Sky IPO, the Barometer Team believes it likely that FANG could spin out its own royalty company and realize a significant gain.
NXP Semiconductor (NXPI NASDAQ)
Last bought May 7 at $60.16.
As the market share leader in near-field communications chips (70%), investors can participate in the strong growth in demand for chip-based secure communication. While Canadians have seen the use of chip-based credit cards for some time, there are roughly two billion magnetic stripped cards still used in the U.S. today. Most cards will likely move to chip-based technology to enhance security. At 12 times next years earnings, Barometer believes that the share price does not reflect the companies near-term opportunities.
RPM International (RPM NYSE)
Last bought May 27 at $42.95.
Given the recent strength in the industrial sector and specifically chemicals, Barometer is invested in several companies in this industry. Due to low input costs in the U.S. including low natural gas prices, chemicals companies are enjoying a cost advantage over other global competitors. On the demand side, RPM is a beneficiary of an improved capital spending environment, improved levels of economic activity and significant product innovation.
Past picks: June 4, 2013
Inter Pipeline (IPL TSX)
Then: $23.90; Now: $32.15 +35.52%
Total return: +41.09%
Wells Fargo (WFC NYSE)
Then: $40.44; Now: $51.71 +27.87%
Total return: +31.47%
Merck (MRK NYSE)
Then: $49.44; Now: $58.30 +17.92%
Total return: +23.02%
Total return average: +31.86%
The investment team at Barometer continues to believe that conditions for equity markets continue to be very attractive. Low interest rates, low inflation and a slowly improving earnings backdrop should support a continued re-allocation from low yielding fixed income to dividend-growth oriented stocks. Continued strong volume growth in North American production of energy is not only benefiting producers, service companies and equipment manufacturers, but also energy infrastructure providers and industrial companies dependent on a predictable and sustainable supply of competitively priced energy. Technology companies are also benefiting from a slow ramp up in corporate spending.