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Barry Schwartz, vice president and portfolio manager with Baskin Financial Services (TGAM)
Barry Schwartz, vice president and portfolio manager with Baskin Financial Services (TGAM)

BNN MARKET CALL

Three top stock picks from Baskin’s Barry Schwartz Add to ...

Barry Schwartz is chief investment officer and portfolio manager at Baskin Financial Services. His focus is North American large caps.

Top Picks:

Progressive Waste Solutions (BIN TSX)

Progressive Waste Solutions should benefit from the continued economic expansion of North America. New management is focused on boosting margins. Its valuation is at a discount to its peers and could be an acquisition target.

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Canadian Utilities (CU TSX)

Canadian Utilities’ valuation continues to be a mystery given its potential for earnings growth. The company trades at a deep discount to its peers but there are potential catalysts that could unlock value. The company operates a midstream division that would command a premium price if put up for auction. CU is a dividend aristocrat and has room to significantly raise its dividend.

KP Tissue (KPT TSX)

KP’s most recent quarters have been affected by lousy weather and higher input costs. We think investors should look past these issues and focus on its predictable revenue stream and strong brand market share. KP’s major capital expenditure plan is now over and it should generate significant free cash flow which should lead to rising dividends every year.

Past Picks: April 18, 2013

Energizer Holdings (ENR NYSE)

Then: $93.34; Now: $113.88 +22.01%; Total return: +24.87%

Bed Bath & Beyond (BBBY NASDAQ)

Then: $66.44; Now: $61.02 -8.16%; Total return: -8.16%

Goldman Sachs (GS NYSE)

Then: $138.60; Now: $159.35 +14.97%; Total return: +16.48%

Total return average: +11.06%

"Now" figures are intraday from the date of the analyst’s appearance on BNN Market Call.

Market outlook:

Stock prices follow earnings and we believe that earnings on the S&P 500 are set to reach record levels again in 2014. While it seems unlikely that 2014 will be a repeat of last year’s buoyant performance, we still believe equities have the most upside of any other asset class. There are over 200 companies on the S&P 500 trading at or below 15 times forward earnings. This is a fertile environment to find blue chip companies at reasonable valuations. If you dig deeper, there are even more bargains in the area of financial services, retail, automotive and technology. Commodity and cyclical stocks look cheap as well but volatility is always a concern. Value investing is all about a “bird in the hand”. The future is uncertain and unknowable so why pay a high price for tomorrow when you can pay a reasonable price today. Stick to companies whose products and services won’t be obsolete in the future.

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