Colin Stewart is Chief Executive Officer & Portfolio Manager at JC Clark Investments Ltd. His focus is North American large caps and long and short strategies.
Maple Leaf Foods
Maple Leaf Foods is a packaged meats and branded protein products company. Following recent announcement of the sale of its 90-per-cent stake in Canada Bread (CBY), Maple Leaf will have an extremely strong balance sheet with close to $6/sh. in net cash. Valuation appears highly depressed, significant capital investments should lead to material margin improvement over next few years
Service Corp. Int’l
This is the largest funeral home/cemetery operator in North America. Attractive industry characteristics: demographics, high barriers to entry, pricing power, strong free cash flow generation. SCI’s recent acquisition of competitor Stewart Enterprises should create ample opportunities for synergies, resulting in EBITDA and FCF growth.
Brookfield Asset Management
Brookfield is an asset management business focused on real estate, power, infrastructure. Growing third party capital base is increasing asset management fee stream. The company has a 2-per-cent dividend yield and trades at discount to NAV.
Past Picks: JANUARY 28, 2013
Then: $25.42; Now: $25.25; Total return: +3.56%
Then: $8.90; Now: $9.51; Total return: +7.85%
Then: $39.79; Now: $43.04; Total return: +12.02%
Total Return Average: +7.81%
While we suspect there may be further volatility ahead, we continue to hold the view that the U.S. economic recovery is gradually gaining momentum. Lower unemployment, strong corporate profits, and a Federal Reserve that we believe will continue to be highly accommodative, should combine to create a favourable environment for U.S. equities. With valuations no longer at a discount and closer to long-term historical averages, we believe earnings growth (rather than multiple expansions) will need to propel equities in the year ahead. Record levels of cash on corporate balance sheets and increasing confidence could also spur a new round of corporate mergers and acquisitions.
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