Michael Decter is president and CEO of LDIC Inc. His focus is on Canadian large caps.
Crescent Point Energy Corp.
Over the last decade, Crescent Point CEO, Scott Saxberg, has grown the company from just a few hundred barrels of production to over 125,000 barrels a day. Crescent Point is a leader in discovering large resource plays (Bakken, Shaunavon and now Uinta) and applying cutting-edge technology to increase recovery factors. And recently the company has been a first-mover in building infrastructure through an aggressive move into crude-by-rail in 2013. The stock has been an industry top performer: returning +24 per cent a year to shareholders since 2003. CPG is heading toward a 100-per-cent payout ratio ($2.1-billion cash flow and $1.7-billion capex and $350-million in dividends) down from previous 120-140 per cent. 2013 was an important year of organic growth as there were no material acquisitions.CPG is a leading indicator for the sector as it is now a top ten E&P company on the TSX Energy Index at ~$16-billion.
Walt Disney Co.
Disney is the world's largest media conglomerate, with assets encompassing movies, television, publishing, and theme parks. Its Disney/ABC Television Group includes the ABC television network and 10 broadcast stations, as well as a portfolio of cable networks including ABC Family, Disney Channel, and ESPN (80-per-cent-owned). Given its broad business mix and consistent earnings growth history, Disney is a defensive way to play an ongoing U.S. consumer recovery. Shanghai Disney Resort spending will end late 2014 which will contribute to FCF and motivate management to return capital to shareholders (DIS has 3-yr ~30-per-cent dividend growth). The Star Wars launch through Lucasfilm will enhance consumer product revenues leading up to its 2015 release. Domestic cable network affiliate revenue is expected to drive above average growth in 2014 (~10-12 per cent), ad revenue better than trend given improved enterprise spending environment, and park revenue expected to remain at or above trend 6-8 per cent. We expect Marvel, Pixar and Lucasfilm new content contributions to drive multiple expansion.
Onex is a private equity investment firm with $18.8-billion EV ($6.8-billion market cap). It is invested within 4 capital pools and has a nearly 80-per-cent U.S. domiciled asset base. We think Onex is one of the best Canadiann financial investments to gain exposure to the U.S. private equity market. The company has an extraordinary track record of deal-making when macro fundamentals shifts are underway. We believe 2014 is near the start of a disposition cycle for Onex and there are a number of meaningful 2014 catalysts that should drive significant outperformance. Management is more aligned with shareholders than any other private equity firm – managers are required to invest personally in each acquisition. U.S. recovery has lifted private company investment value and conditions are good for strategic dispositions.
Past Picks: March 21, 2013
Hudson’s Bay Co.
Then: $15.05; Now: $18.01; Total return: +22.06%
Twin Butte Energy
Then: $2.30; Now: $2.33; Total return: +10.68%
Then: $4.04; Now: $3.89; Total return: +9.45%
Total return average: +14.06%
We expect a positive year for both Canadian and U.S. equities. We believe that economic growth based on recovery of housing, consumer purchases and infrastructure investment will underpin stronger economic growth across North America. It is our expectation that interest rate increases will be modest in 2014.