Gavin Graham.Kevin Van Paassen/The Globe and Mail
Gavin Graham is chief strategy officer of Integris Pension Management Corp. His focus is on global equities and North American large-cap stocks.
Top Picks:
Ensco PLC
Ensco is the second-largest offshore oil and gas driller, with earnings of $1.25-billion (all figures US$) on revenues of $4.3-billion in 2012 and a market capitalization of $2.8-billion. Following the acquisition of Pride International for $7.3-billion in 2011, it has a fleet of 75 rigs of which 29 are floaters (drill-ships and semisubmersibles) which is one of the youngest in the industry, with an average age of three years for its floaters which command 60 per cent plus margins. It is rated BBB and yields 3.6 per cent.
Cargojet
Cargojet is a specialist cargo airline with a fleet of 11 owned Boeing 727s, 1 leased 757 and 2 leased 767s. It flies scheduled overnight cargo services between 14 Canadian cities, Newark and Bermuda and Canada and Poland. As 50 per cent of all cargo is required to be flown on Canadian owned airlines, it has major long term contracts with FedEx, UPD and TransForce to 2018, sells at a P/E of 13.7 times 2013's earnings and yields 5.2 per cent.
Capstone Infrastructure
Capstone Infrastructure is a diversified utility with interests in gas, hydro, wind solar and biomass power, owns 50 per cent of U.K. water company Bristol Water and 33 per cent of a Swedish heat transfer operation. It has 465 MW of power assets after its $70-million takeover of Renewable Energy developers in September, and, while its Power Purchase Agreement for its 156 MW Cardinal gas plant in Ontario expires next year, it is confident that it will be renewed. If not, this will only represent a 15-per-cent fall in its adjusted free cash flow. It 8.1-per-cent yield represents only 50 per cent of its AFFO.
Past Picks: November 12, 2012
Sherritt International
Then: $4.79
Now: $3.65
Total return: -20.87 per cent
Mead Johnson Nutrition
Then: $65.85
Now: $80.98
Total return: +25.22 per cent
Intact Financial
Then: $63.23
Now: $64.90
Total return: +5.51 per cent
Total return average: +3.29 per cent