President and portfolio manager, Lorne Steinberg Wealth Management, Montreal
1. Alcoa Inc.
The commodity slump has weighed heavily on the aluminum producer, which has fallen “wildly out of favour” amid a global surplus and weak demand, Mr. Steinberg said. But the supply picture is improving as capacity declines. “This is a company you have to buy when it’s losing money or breaking even,” he said. “It’s a deep cyclical and hasn’t benefited at all from the rally.”
2. Cisco Systems Inc.
The risk premium attached to the tech giant’s stock fails to fully account for the company’s large cash reserves, amounting to almost one-third of market capitalization, Mr. Steinberg said. “It’s not a very risky situation,” he said. “There aren’t many companies the size of Cisco that are capable of growing their top line in the high-single digits.”
3. KB Financial Group Inc.
One of South Korea’s largest banks, KB trades on the New York Stock Exchange as an American depositary receipt. Although South Korea is essentially a developed economy, the country has been sullied by the decline of emerging market economies this year. As a result, KB is trading at just 0.6 times tangible book value, Mr. Steinberg said.
Chairman, J. Zechner Associates, Toronto
1. Athabasca Oil Corp.
A perennial underperformer, Athabasca’s most recent stock slump followed a court decision that could jeopardize the company’s Dover oil sands project. But Mr. Zechner thinks Athabasca could be a candidate to recover and capitalize on an oil sands resurgence.
2. Capstone Mining Corp.
With the improving global economic outlook lifting copper prices in recent months, Capstone is well positioned for a rally through its three producing assets. “Copper prices are going higher, these guys own copper mines, they’re mid-sized and they’re growing.”
3. National Bank of Canada
Canadian banks have rallied impressively this year, with most stocks now about fairly valued, he said. “You can’t argue they’re really cheap, but they’re not really expensive.” But with a price-to-earnings ratio of about 10, National Bank trades at a discount to the Big Five.
President, Baskin Financial Services, Toronto
1. General Motors Co.
Although GM’s stock is up 27 per cent this year, there is further earnings upside as a result of the ongoing resurgence in auto sales. “We think the car sales we saw this quarter are not anywhere near the end of the cycle.”
2. Zimmer Holdings Inc.
This medical device manufacturer could see a spike in demand as a result of the implementation of Obamacare, Mr. Baskin said. “If you’re a person without health insurance, you didn’t get a new knee or a new hip. I think a lot of these people are now going to get new knees and hips.”
3. Energizer Holdings Inc.
The rise of the euro, which recently approached $1.40 (U.S.) for the first time in two years, bodes well for U.S. multinationals. Energizer, which aside from batteries manufactures personal care products, is well exposed to the European market with 35 per cent of its sales coming from outside the United States, Mr. Baskin said.
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Companies & investments Mentioned In This Article (9)
GM-N 34.80 0.346 % 5,558,114 Zimmer Holdings
ZMH-N 99.31 -0.141 % 1,015,724 KB Financial Group
KB-N 40.69 1.547 % 65,271 Capstone Mining
CS-T 2.71 0.00 % 316,451 National Bank of Canada
NA-T 52.31 0.616 % 1,280,503 Cisco Systems
CSCO-Q 24.99 0.563 % 17,972,307 Energizer Holdings
ENR-N 121.52 0.058 % 486,627 Alcoa
AA-N 16.61 0.241 % 9,158,754 Athabasca Oil
ATH-T 7.92 4.348 % 7,889,809