Mike Newton is portfolio manager and director at The Newton Group, ScotiaMcLeod. His focus is North American large caps and ETFs.
Top Picks:
IAC/Interactive (IACI.O)
Most recently purchased last week at $68.70 USD
IACI owns and operates a variety of what I consider interesting and exciting media assets with strengths in content and mobile. The Match Group, which makes up about a quarter of revenue, is a cornerstone business gaining global traction with multiple brands (including the namesake Match.com, Tinder and OkCupid). The upcoming IPO of Match.com is expected sometime before the end of the year and could possibly be a hot public offering of nearly $100-million (U.S.) worth of shares, or 20 per cent of their ownership. Revenue from IAC's Match Group grew 19 per cent in 12 months and adjusted earnings rose 37 per cent year-on-year as the number of paying subscribers rose 16 per cent to 4.17-million in the quarter, from 3.6-million a year ago. IACI also announced that it has renewed its partnership with Google.
CCL Industries (CCLb.TO)
Most recently purchased in May, 2015 at $107.80 CAD
CCL Industries Inc. is a specialty packaging company, with its headquarters in Toronto. CCL operates three divisions: CCL Label (the largest global converter of labels), CCL Container (aluminum aerosol cans), and Avery (labels, specialty converted media, and office products). CCL's customer base consists primarily of large, multinational corporations that operate in the home and personal-care, health-care, durable goods, and specialty food and beverage sectors. The company operates 91 globally dispersed production facilities and has a workforce of more than 9,700 people. Business mix is approximately 65 per cent Label, 9 per cent Container and 26 per cent Avery. 95 per cent of consolidated sales are generated outside of Canada with 55 per cent in the U.S. CCL investors have enjoyed a 50 per cent increase in annual dividend since Q1 2014 and dividends have been paid without omission or reduction for over 30 years.
Roper Technologies (ROP.N)
Most recently purchased this morning at $182.82 USD
Roper is a diversified conglomerate with a significant amount of recurring revenue (50 per cent) and gross margins near 60 per cent. Roper was historically known as an industrial manufacturing company, making products like pumps, compressors, and valves. Today, Roper is made up of more than 40 businesses across four divisions — Medical and Scientific Imaging, RF (radio frequency) Technology, Industrial Technology, and Energy Systems and Controls. Each of Roper's subsidiary businesses has its own president who is responsible for its own income statement (sound like Berkshire Hathaway?). As I have always stated, I love best-in-class capital allocation stories and this is one of those.
Roper has a differentiated business model with unwavering focus on asset-light, high-free cash flow businesses and yet has elements of a publicly traded private equity firm. Roper has a niche, medium-tech portfolio, with 85-per-cent of sales from customized products and 15-per-cent from standardized, reducing exposure to pricing pressure.
Management has disclosed its plans to deploy $8-billion on M&A over the next five years, with near-term balance sheet capacity of $1.5-billion through year-end 2016.
Past Picks: December 16, 2014
Canadian National Rail (CNR.TO)
Then: $76.59 Now: $81.80 +6.80% TR: +8.12%
Tesla Motors (TSLA.O)
Then: $197.81 Now: $212.96 +7.66% TR: +7.66%
Starbucks (SBUX.O) *Stock Split* April 9, 2015 - 2 for 1
Then: $79.13 Now: $63.51 +60.52% TR: +62.06%
Total Return Average: +25.95%
Market outlook:
I am not going to tell you everything is well. I am not going to be a cheerleader for global markets. I will not use language like "cautiously optimistic" or "sideways market." North American index movements will likely continue to give little clarity as to the next big direction. But what I will do is encourage investors to seek out individual stock-specific success stories, especially those with lower volatility characteristics, and protect them when necessary from angry market environments. My experience has been that one of the best risk controls that one can implement to survive disruptions exists within a straightforward, transparent and sufficiently liquid portfolio and not by residing in complex approaches.