Barry Schwartz is chief investment officer and portfolio manager at Baskin Financial Services. His focus is North American large caps.
Power Corp. of Canada (POW TSX)
Power trades at an over 20-per-cent discount to the sum of its parts. While its dividend has been stagnant for years, we expect an increase in the next 12 months. Investors can collect a fat dividend yield while they wait for interest rates and markets to go higher.
General Motors (GM NYSE)
We believe that GM is on pace to earn $5 (U.S.) a share in 2015. Its current valuation is pricing in only bad news going forward. Meanwhile, the company is on pace to sell a record number of cars this year.
Rogers Communications (RCI.B TSX)
Rogers offers a compelling opportunity for value investors. The company has at least $5-billion (Cdn) of assets that could be unlocked to create shareholder value. While waiting for Rogers’ operations to improve investors can collect a dividend yield of 4.2 per cent.
Past Picks: July 3, 2013
KP Tissue Inc. (KPT TSX)
Then: $16.60; Now: $15.85 -4.52%; Total return: -0.32%
Dorel Industries (DII.B TSX)
Then: $36.50; Now: $39.00 +6.85%; Total return: +10.59%
Whistler Blackcomb (WB TSX)
Then: $13.95; Now: $17.80 +27.60%; Total return: +35.77%
Total return average: +15.35%
The TSX is now at an all-time high. Big deal. The S&P 500 reached an all-time high last year but yet is up another 30 per cent since then. Since its last market high in June 2008, Canadian GDP is up 18 per cent. Had the TSX kept pace with the growth in the Canadian economy, it would be close to 18,000 today. While we don’t know if the TSX will climb higher this year, our view of the market based on fundamental analysis is positive. While there are a lot of companies trading at dumb valuations, we are finding more opportunities than room in our portfolio for above-average companies trading at below-average valuations. Compared to the only other investment alternative, bonds, stocks win hands down. After taxes, inflation and fees, bond investors are lucky to break even. Meanwhile, investors can buy a diversified portfolio of dividend aristocrats and earn a higher yield than their bond portfolio with the potential for rising income and capital appreciation.
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