Don Lato.
Don Lato is president of Padlock Investment Management. His focus is North American equities.
Top Picks:
Jarden Corp. (JAH-NYSE)
While falling oil prices may been negatively impacting the energy sector, this consumer products giant is clearly reaping the benefits. Jarden is the company behind dozens of consumer products including truly iconic brands such as Coleman, Sunbeam, Rawlings, Mr. Coffee, K2 Skis, Oster and First Alert among many others. The company has grown both organically and through acquisition and recently reported a 19-per-cent year-over-year growth in revenue for the third quarter. Long term earnings are projected to grow by 13 per cent per year while the company is trading at a very reasonable multiple of 14.5X next year's earnings.
Toronto-Dominion Bank (TD-TSX)
Canadian banks should be the cornerstone of all Canadians' equity portfolios and particularly when they have retreated from their highs to become even more compelling. TD Bank has sold off approximately 6 per cent from its latest all-time high registered in August. At current prices, the stock yields a very attractive 3.4 per cent and is trading at a modest 11.8 X next October's earnings. While investors may be concerned about long time CEO Ed Clark's departure, the bank will remain in great hands under the stewardship of long time lieutenant, Bharat Masrani.
Parex Resources (PXT-TSX)
This well-managed, well-financed oil and gas company is the proverbial baby that has been thrown out with the bath water of falling oil prices. The stock is down over one third from its high in late July. Parex has no debt and is a self-funded exploration program that has seen tremendous growth in reserves and production (25-per-cent of which is hedged for the 4th quarter at $103US/bl). Analysts' projections indicate that at an oil price as low as $70US/bl, Parex will still generate approximately $2.50 CDN in cash flow in 2015 to be trading at just over 4.0X cash flow.
Past Picks: November 27, 2013
Parex Resources (PXT-TSX)
Then: $6.17; Now: $10.67 +72.93%; Total return: +73.93%
NCR Corp. (NCR-NYSE)
Then: $34.79; Now: $27.56 -20.78%; Total return: -20.78%
Sears Holdings (SHLD-NASDAQ) * Spin Out *
Lands' End was spun out to Sears Holdings shareholders in April. I sold it for all of my clients when we received it and the proceeds were the equivalent to $8.14 (U.S.) per share of Sears. Factoring that in, it is still a negative return but not quite as bad as it seems.
Then: $63.68; Now: $36.99 -27.47%; Total return: -27.47%
Total return average: +8.56%
Market outlook:
We have come through a very turbulent few weeks in the equity markets and the question in the forefront of investors' minds is whether or not we have seen the last of new all-time highs in the indices for a while. My answer is that we have not, particularly as we enter the historically strongest six months of the four-year U.S. election cycle. The six months from November to April of the year of the mid-term election, as measured by the S&P 500 return, has greatly outpaced any of the eight six-month periods in the four-year cycle. In addition, we have not yet witnessed many of the usual signs of a market top such as an inverted yield curve, recession fears or relatively attractive bond yields among others.