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BNN MARKET CALL

Three top stock picks from Goodreid’s Gordon Reid Add to ...

Gordon Reid is president and chief executive officer of Goodreid Investment Counsel. His focus is U.S. equities.

Top Picks:

Apple Inc.

Apple’s recent price weakness is an opportunity to position for the coming new product launches. The existing business has created a floor for the stock, which has over 30 per cent of its market capitalization in cash and sports a 16-per-cent free cash flow yield.

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United Technologies Corp.

United Technologies is a global supplier of industrial products (Carrier, Otis Elevator, Pratt and Whitney, Sikorsky Helicopter). Their integration of the Goodrich purchase is boosting earnings and we expect 10-per-cent annual EPS growth for the next few years.

Washington Federal

This west coast regional bank is well positioned to take advantage of a steepening yield curve and renewed loan growth. They recently purchased about 50 retail bank branches from Bank of America, which will be the catalyst for revenue and earnings growth.

Past Picks: January 10, 2013

Ensco

Then: $61.50; Now: $50.52 -17.85%; Total return: -14.64%

Cooper Tire & Rubber Co.

Then: $26.40; Now: $22.40 -15.15%; Total return: -13.80%

Visa Inc.

Then: $160.51; Now: $217.12 +35.27%; Total return: +36.38%

Total return average: +2.65%

Market outlook:

The long overdue correction in the market appears to be taking hold. The reason (excuse??) is emerging market weakness on the back of U.S. Federal Reserve tapering. A stronger U.S. economy and dollar puts pressure on other economies, forcing them to increase their interest rates. This weakens their economic prospects and, circling back, hurts the outlook for U.S. companies doing business internationally. Look for a 5-per-cent to 10-per-cent correction before the market takes a more optimistic view.

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