Michael Sprung is president of Sprung Investment Management. His focus is on Canadian large caps.
Cenovus Energy (CVE TSX)
Last Purchase May 12, 2014, $31.25
Cenovus is an integrated oil and gas company focused on the development of bitumen assets in Alberta with significant joint venture operations at Foster Creek and Christina Lake. Production should ramp up strongly over the next few years resulting in increasing earnings, cash flow and potential dividend increases. The stock has lagged the energy sector over the past year and appears attractive at current levels.
Fortis (FTS TSX)
Last Purchase March 4, 2014, $30.55
Fortis is the largest investor owned gas and electric distribution utility in Canada with operations in the U.S. and Belize. Over the next few years, Fortis is expected to significantly increase its rate base. The acquisition of UNS Energy Corp. in Arizona is closed on August 15, well ahead of schedule. The addition of UNS Energy Corp. is a major step for the Company. During this period of transition, the yield will support the stock and given the longer term anticipated earnings growth, the investment should do well.
Stuart Olson (SOX TSX)
Last Purchase March 20, 2014, $9.00 (had been held over)
Stuart Olson formerly The Churchill Corporation, is one of Canada's largest construction firms providing general contracting and electrical building systems contracting in the institutional and commercial construction markets as well as electrical, mechanical and specialty services in the industrial construction markets. The company is recovering from an acquisition in 2010 that resulted in losses from poorly priced contracts. With a record high backlog of projects at better margins, profitability should increase going forward. The dividend currently yields 4.80%.
Past Picks: September 4, 2013
CIBC (CM TSX)
Then: $81.94; Now: $104.76; Total return: +34.46%
Suncor Energy (SU TSX)
Then: $35.83; Now: $44.16; Total return: +25.39%
Agrium (AGU TSX)
Then: $89.11; Now: $103.37; Total return: +19.88%
Total return average: +26.24%
Investors have been the beneficiaries of surging markets in North America over the past few years as the economies have recovered from the financial crisis. Valuations have been stretched as multiples have expanded. In this environment, taking some profits where securities have had large appreciation may be prudent. A larger weighting in cash can provide a good option to be deployed should any market setback occur.