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BNN Market Call

Three top stock picks from ScotiaMcLeod’s Mike Newton Add to ...

Mike Newton is portfolio manager and director at ScotiaMcLeod. His focus is North American large caps and ETFs.

Top Picks:

Garmin

Wall Street thinks Garmin is a technology has-been. But that couldn’t be further from the truth for this S&P 500 member. Yes, the auto and mobile market may be smaller, but it is still profitable and the market is completely ignoring the growth in the outdoor, fitness and marine markets which are providing greater contributions to operating margins. The stock yields 4.1 per cent with a reasonable 64 per cent payout ratio.

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Cineplex

One of my favourite buy-and-hold names is back to attractive levels. The largest exhibitor in Canada commands a 67-per-cent share of national box office revenues. Its size and scope constitute a material barrier to entry while providing strategic importance with film distributors, concession suppliers, and advertisers. It also has a material tax pool and strong yield of 3.76 per cent. 3D and other premium formats should also be a catalyst for sustained earnings growth over the longer term.

Sprouts Farmers Market

Likely the first time you will hear of this company which in itself is appealing. An organic grocery chain backed by Apollo Global Management more than doubled on its first day of trading on August 1 - the biggest gain for a U.S. initial public offering in more than two years. Technically the share price is in a good place – still trading at an all time high. 13 per cent of the company is publicly traded. With 188 stores predominantly in the U.S. Southeast, Sprouts is an authentic natural and organic food grocery store in the fastest growing segment of the U.S. supermarket industry. Small group of analysts covering the name including Goldman Sachs and BAML.

Past Picks: October 16, 2012

Liberty Media - Starz spin out 01/11/2013 prices adjusted
Then: N/A
Now: $146.11
Total return: +59.34 per cent

Enerplus
Then: $16.16
Now: $17.69
Total return: +17.10 per cent

InterXion
Then: $22.79
Now: $23.56
Total return: +3.38 per cent

Total return average: +26.61 per cent

Market outlook:

Stock prices have begun the transition from their reliance on monetary policy to fundamentals which is a welcome change to the investing backdrop. Although we are entering into a seasonally weak period for the market and after nearly six years of weakness being sold , I would now rather build positions on any pullbacks. Typically economic and stock market performance is relatively strong during periods of rising real interest rates, particularly when starting from low levels. Lastly, stock correlations are falling, so it is important for investors to adopt a more active approach to investing.

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