John Zechner.Danny Yu
John Zechner is chairman of J. Zechner Associates. His focus is North American large caps.
Top Picks:
Google (GOOG NASDAQ)
Google has the best value in large technology; it remains best positioned to benefit from proliferation of connected devices and data management. It controls the largest search engine and owns the most prolific mobile software operating system (Android). Google is monetizing the value of its existing platform and supplementing with good acquisitions (i.e. YouTube) from huge free cash flow. All of this at an earnings multiple in line with the overall market.
Trinidad Drilling (TDG TSX)
The company has strong cash generation in energy sector and potential for increased valuation for service stocks favours companies like Trinidad. Its balance sheet is much improved and cash flows are growing. The joint venture with Halliburton is giving them rig access to the global market as well. Stock has sold off almost 50 per cent from July high but growth remains intact.
Catamaran (CCT TSX)
Catamaran provides pharmacy benefits management services and solutions to the health care industry, which has become a higher growth area in need of modernization with the roll-out of the Affordable Care Act in the U.S. Earnings beat expectations in last two quarters despite having to put costs in place to grow both public and private exchanges. Its valuation is back to multi-year low and the company has also been able to make accretive acquisitions to supplement organic growth.
Past Picks: November 29, 2013
Athabasca Oil (ATH TSX)
Then: $6.48; Now: $4.61 -28.86%; Total return: -28.86%
Walt Disney (DIS NYSE)
Then: $70.54; Now: $87.54 +24.10%; Total return: +26.63%
Martinrea International (MRE TSX)
Then: $8.88; Now: $11.80 +32.88%; Total return: +34.41%
Total return average: +10.73%
Market outlook:
While we remain positive on the longer-term outlook for stocks due to a growing global economy, low levels of long-term interest rates and a secular increase in corporate profitability, we continue to be very cautious in the short-term as stocks have had a strong recovery from the 2009 lows and have not seen a serious correction in over three years. We moved to a significant underweight position in stocks in August by reducing exposure in the energy, base metals, consumer and financial sectors. We remain concerned about geopolitical risks, excessive investor complacency and slowing economic growth. We would start adding back to positions on a decline of 10-12 per cent in the stock averages. This could occur quickly as we have already seen resource-based stocks falling as much as 20-30 per cent from their early summer highs.