Lorne Steinberg.
Lorne Steinberg is president and portfolio manager at Lorne Steinberg Wealth Management. His focus is on deep value global equities.
Top Picks:
Koninklijke Philips N.V (PHG NYSE)
Philips is in the latter stages of restructuring its two largest divisions: health care and lighting, which should help drive annual earnings growth of 10-15 per cent through 2017. Free cash flow is accelerating which should lead to ongoing dividend increases and share buybacks.
Total S.A. (TOT NYSE)
This integrated French oil and gas company is poised to benefit from its significant capital investments made over the past few years, which should result in higher earnings and free cash flow. The focus has now shifted to disposal of non-core assets and maximizing the return on its global energy portfolio. All of this should support good earnings growth over the next several years. The shares currently yield about 5 per cent, with dividend growth expected to continue.
Hirano Tecseed (6245Tokyo Stock Exchange)
This company is another example of why Japan is the most undervalued stock market in the world. Hirano Tecseed is a highly specialized manufacturer of coating laminating machinery, as well as other machinery used in various engineering processes. Its share price is about equal to its cash position, so investors pay almost nothing for a profitable well-run business with a 3-per-cent dividend yield.
Disclosure: | Personal | Family | Portfolio/Fund |
PHG | Y | Y | Y |
TOT | Y | Y | Y |
6245 | Y | Y | Y |
Past Picks: July 2, 2013
Xerox Corp. (XRX NYSE)
Past commentary: Why we like it: Xerox has transformed itself from an equipment company to a services company. Its global outsourcing business accounts for over 50 per cent of revenues, and is the engine for future growth. The company is trading at a compelling valuation of about 7 times its free cash flow, and it is using this cash to buy back shares, reduce debt and make acquisitions.
Then: $9.23; Now: $13.49 +46.15%; Total return: +49.25%
Aegon NV (AEG NYSE)
Past Commentary: Why we like it: Aegon is one of the most undervalued life insurance companies in the world. Operations are focused in North America, Netherlands and UK. The company is well capitalized and extremely cheap. It is trading at less than 10 times earnings, a steep discount to tangible book value, and offers a dividend of over 4 per cent. We expect double digit earnings growth over the next couple of years.
Then: $6.90; Now: $7.81 +13.19%; Total return: +17.36%
ING Group (ING NYSE)
Past commentary: Why we like it: ING has rebounded from the financial crisis and is solidly profitable. It should complete its government loan repayment over the next twelve months, and we expect dividend to be reinstated in 2014. ING is trading at less than 7 times earnings, and half of tangible book value. We expect significant earnings growth over the next five years, providing significant upside. We expect that markets in Europe and Japan will outperform Canada.
Then: $9.19; Now: $13.48 +46.68%; Total return: +46.68%
Total return average: +36.76%
Disclosure: | Personal | Family | Portfolio/Fund |
XRX | Y | Y | Y |
AEG | Y | Y | Y |
ING | Y | Y | Y |
Market outlook:
After a strong rebound, equity markets appear rather fully valued, in general, which argues for a more cautious approach. Instead, yield-hungry investors have been pouring money into equities due to low interest rates, but stock markets do not come with money-back guarantees. Too many investors remain focused on short-term returns instead of looking at the longer-term risks and opportunities. "Buying low" remains the key to long–term investment success and we are having trouble finding many cheap stocks in this environment. Our latest investment newsletter – "The Long-Term Investor Diet" (available on our website) – highlights the importance of capital preservation and adhering to a long-term strategy.