Stan Wong.
Stan Wong is director of wealth management and portfolio manager, Stan Wong Private Wealth Management, ScotiaMcLeod. His focus is North American large caps and ETFs.
Top Picks:
Loblaw Cos. Ltd. (L-TSX)
Loblaw Companies is Canada's largest food and pharmacy retailer. As a classical consumer staples stock, Loblaw provides investors with steady and predictable growth along with a modest but growing dividend. The acquisition of Shoppers Drug Mart provides the grocery giant with not only cost and revenue synergies, but also exposure to the higher margin profile of the drug retail business. Further diversification is enjoyed with President's Choice Financial (a joint venture with CIBC), Joe Fresh apparel stores and majority ownership of Choice Properties REIT. Loblaw currently trades at a forward price-earnings multiple of 18x with an expected long-term earnings growth rate of about 15 per cent; this gives the shares a very attractive PEG ratio of about 1.2x.
Royal Caribbean Cruises (RCL-NYSE)
Royal Caribbean is the world's second largest cruise ship company. Royal Caribbean Cruises is well-positioned to benefit from a recovering global economy, lower fuel costs and positive long-term demographic trends. As well, modest industry capacity increases should help boost ticket price revenues for Royal Caribbean. Moreover, Royal Caribbean Cruises is making capital expenditures to capitalize on growth in Asia (particularly China). Royal Caribbean Cruises shares are compelling, currently trading at a forward-earnings multiple of 16x with a long-term expected annual earnings growth rate near 20 per cent; this gives the shares a PEG ratio below 1.0x.
iShares S&P/TSX Capped Energy ETF (XEG-TSX)
The iShares S&P/TSX Capped Energy ETF provides investors with exposure to large-cap Canadian energy names including Suncor, Canadian Natural Resources and Crescent Point Energy. With supply conditions expected to continue tightening, energy prices are expected to stabilize and allow for energy shares to rebound over the next 18-24 months. Indeed, U.S. oil rig count has already fallen to levels not seen since June 2011. Moreover, geopolitical tensions and an unexpected OPEC production cut could act as catalysts for the energy sector.
Past Picks: February 13, 2014
General Electric (GE-NYSE)
Then: $25.44; Now: $25.99 +2.16%; Total return: +6.70%
Gilead Sciences (GILD-Nasdaq)
Then: $82.55; Now: $103.53 +25.41%; Total return: +25.41%
Starbucks Corp. (SBUX-Nasdaq)
Then: $74.96; Now: $93.49 +25.16%; Total return: +27.03%
Total return average: +19.71%
Market outlook:
Near-term, North American equity indexes appear a bit extended and a brief pause may be in order. Both the TSX and S&P 500 are approaching overbought conditions from a technical perspective and from a fundamental view, are trading at the higher end of historical valuation ranges. Continued geopolitical pressures, uncertainty over the timing of rising U.S. interest rates and the spillover effects from lower commodity prices will certainly cause greater volatility for equities this year. On the positive side, lower energy costs should produce a net benefit to the U.S. economy where the consumer represents over 70 per cent of GDP. Oil-importing countries internationally should also benefit from lower energy prices. Despite equity markets looking a bit more challenging this year, we expect high-quality, reasonably valued U.S. stocks to grind higher due to the improving U.S. economy, drop in oil prices and continued easy monetary policy. In Canada, the energy sector should provide a decent buying opportunity at some point this year as supply conditions continue to tighten. We continue to prefer U.S. equities (and the U.S. dollar) over Canadian equities due to the relative strength of the economy stateside and look to take advantage of opportunities on market dips.