Christine Poole is managing director of GlobeInvest Capital Management. Her focus is on North American large caps.
Royal Bank (RY TSX)
Royal Bank’s leading domestic lending franchise, dominant capital markets position and growing wealth management business contribute to consistent financial results. Dividends are expected to grow at a similar pace to earnings growth. Boasting an above average return on equity compared to its competitors, Royal Bank is reasonably valued and has undeservedly lagged its peers year-to-date. The stock provides investors with a current dividend yield of 3.8 per cent.
Fluor Corp. (FLR NYSE)
Fluor is a professional services firm, providing engineering, procurement, construction and maintenance as well as project management services globally. Its geographically diversified backlog consists of 32 per cent in the U.S., 34 per cent in the Americas, 28 per cent in Europe, Africa and the Middle East and 6 per cent in Asia/Pacific countries. In its most recent quarter, Fluor reported a record $10.7-billion (U.S.) in new awards, driven by the oil and gas segment, resulting in a strong backlog of $40.2-billion or book-to bill 2.0x. Fluor’s global expertise and strong balance sheet are competitive advantages when bidding for new business around the world.
Cineplex Inc. (CGX TSX)
Cineplex is Canada’s dominate film exhibition operator with an estimated 76 per cent of Canadian box office revenues. Management continues to successfully maximize revenue per patron through increasing concession spending and premium priced formats, such as 3D films, IMAX screens and VIP auditoriums. Alternative programming is also offered to help drive traffic into its theatres. Cineplex recently increased its dividend and provides an attractive 3.7-per-cent yield.
Past Picks: June 11, 2013
MacDonald Dettwiler (MDA TSX)
Then: $66.20; Now: $89.19 +34.73%; Total return: +36.86%
CGI Group (GIB.A TSX)
Then: $30.12; Now: $36.50 +21.18%; Total return: +21.18%
Mondelez International (MDLZ Nasdaq)
Then: $29.80; Now: $37.92 +27.25%; Total return: +29.42%
Total return average: +29.15%
The slow upward grind in equity markets will persist, supported by positive earnings revisions, ongoing corporate profit growth, signs of improving global economic momentum, accommodative monetary policy by central banks and a resurgence in global merger and acquisitions (M&A) activity. The recent rally in U.S. Treasuries was largely unexpected, possibly triggered by lowered expectations of U.S. economic growth and inflation exacerbated by dovish comments from the Fed as well as profit taking/portfolio re-balancing by pension and institutional funds to lock in healthy gains from equity markets. Current bond yields are unsustainably low and are expected to gradually rise as economies improve and liquidity is withdrawn at a measured pace. Equities are expected to outperform all other asset classes.