Jennifer Radman is portfolio manager at Caldwell Investment Management. Her focus is on U.S. equities.
Top Picks:
Zimmer Holdings Inc.
Zimmer produces reconstructive and surgical products, primarily replacement knees and hips. It is a global company, with 45-per-cent of revenue coming outside the Americas. Zimmer has strong operating metrics yet is one of the cheapest names in the health-care equipment space. It recently launched a new knee which is customizable, producing a better fit and comfort level versus existing products. Initial results are promising and should drive growth as it takes several years for doctors to adopt new technologies. We also see Zimmer benefiting from demographic trends and health reform in the U.S., as the population ages and health coverage becomes available to more people.
Tyson Foods
Tyson produces and distributes beef, pork, chicken and prepared foods. The company has done a lot to improve its business over the last several years and we think the benefits are just starting to get noticed by investors. The valuation is compelling at 11x earnings.
Celestica
Celestica has traded down on weakness in its end markets. We think this is a great entry point because the company has a lot of cash on the balance sheet, management makes good capital allocation decisions and the company has been doing a good job winning new business. The stock's valuation is compelling at 10x earnings.
Past Picks: January 11, 2013
Kohl's Corp.
Then: $42.02 (U.S.)
Now: $54.72
Total return: +32.96 per cent
KKR & Co. L.P.
Then: $15.98
Now: $22.65
Total return: +21.26 per cent
Cisco Systems Inc.
Then: $20.48
Now: $21.26
Total return: +6.12 per cent
Total return average: +30.98 per cent
Market outlook:
While good investment opportunities still exist, the strong performance of equity markets has made them harder to come by. There are three common themes across many investor portfolios that we are advising against:
- 1) owning too many stocks (more than 30) or a portfolio that looks like the index;
- 2) pursuing a “safety”/yield strategy;
- 3) not having enough exposure to U.S. stocks.
Concentrated portfolios (25-30 stocks) and active management (not looking like the index) are key as not all areas of the market are attractive. We see the popular yield strategy, for example, as continuing to pose significant risks to capital loss as valuations remain well above historic levels (even with the poor performance of these names this year). We see the best opportunities in more cyclically-tied companies with strong balance sheets and management teams that are prudent with capital allocation. Many of these companies trade in the U.S. and so we currently have over 50-per-cent exposure to the U.S. market for our clients.