Mike Newton is portfolio manager and director at The Newton Group, ScotiaMcLeod. His focis is on North American large caps and ETFs.
WesternOne is a compelling growth story that is a pure-play on the significant capital spending planned in Western Canada with growing operations in the shale plays of Texas. As an added bonus the company is a terrific dividend play with a 7.7-per-cent yield. Positive items in the coming quarters include the winding down of Australian operations and the related losses, continued steady growth from large Britco contracts with Manitoba Hydro and Devon Energy, expansion in U.S. shale markets, and perhaps most importantly, the installation of the new CEO Peter Blake in 2 weeks who was the former Richie Brothers CEO. His credentials from the construction and infrastructure background are ideally suited to the WesternOne business.
FedEx Corp. (FDX)
The global shipping and logistics company reported a respectable EPS beat during its latest earnings announcement. FedEx will benefit from increased investor interest in logistics plays on signs of economic improvement. FedEx has grown EPS over 24 per cent on a trailing five year basis. In 2008, outsourcing to APAC was re-examined by many manufacturers, however FedEx showed skill in adapting. Ironically, a possible re-acceleration of international airfreight and in particular, a turnaround in China’s economy appears underway which FedEx is well-positioned to capture
Boeing Co. (BA)
Boeing has seen a 15-per-cent decline in the past few months. BA’s P/E multiple has compressed several points and still looks compelling. Boeing recently reported strong Q2 results and raised its full year forecast as the world’s biggest plane maker reaps gains from faster production that is driving jetliner deliveries to record levels. Apparently, employees at the plant in Everett are working mandatory 10-hour days and weekends just to keep up. BA plans to cut an additional $2-billion (U.S.) in costs from its defence unit after already cutting $4-billion, with majority of savings coming from its network of suppliers. BA recently raised its share repurchase program by $1-billion to $3.5-billion. Great cash flow generator for any portfolio.
Past Picks: Aug. 26, 2013
PowerShares S&P500 High Beta ETF (SPHB NYSE)
Then: $26.29; Now: $32.83 +24.88%; Total return: +26.19%
Open Text Corp. (OTC TSX) (there was a 2-for-1 stock split on Feb. 19, 2014)
Then: $73.44; Now: $61.16 +66.56%; Total return: +68.98%
Boeing Co. (BA NYSE)
Then: $105.53; Now: $121.98 +15.59%; Total return: +18.05%
Total return average: +37.74%
Although concerns over rising geopolitical risks and valuation warnings have dominated the headlines in recent weeks, the current mini-correction has been criticized as not being painful enough. But has it? By looking under the hood, I would argue that a major correction in high fliers already happened in March, and a constructive correction in great U.S. blue chips already happened earlier this summer and into July. A welcome return to “investors paying attention” is healthy for the next move in the market in which good corporate results will be properly rewarded. Currently, I would stay overweight equities until further notice. If you become too complacent, you may not notice the fade in the “buy the dips” mentality and could face unnecessary capital losses.
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