These are stories Report on Business is following Monday, Dec. 9, 2013.
Barron’s unveils stock picks
The annual Barron’s list of favourite stocks for the coming year has some interesting names, particularly if you’ve been following the fortunes (or lack thereof) of Barrick Gold Corp.
Barrick and Canadian Natural Resources Ltd. are the Canadian names on the 2014 list unveiled on the weekend, which features everything from cars to technology.
“Buying cheap stocks looks like a good approach, given the market’s elevated level,” said Barron’s, the influential investment publication, boasting of how its 2012 picks gained 17 per cent, compared to the 12.6-per-cent climb of the S&P 500.
(Its choices didn’t fare so well in 2011, outpacing the fall in the U.S. benchmark.)
Let’s start with its Canadian favourites:
Barrick (The depressed)
“Want a depressed play on a depressed commodity? With a year-to-date decline of 56 per cent to $15.50, Barrick trades below where it did a decade ago when gold was below $400 an ounce, versus $1,228 now.” Using U.S. numbers, Barron’s noted that Barrick trades at just seven times its projected earnings for next year, and “what it has lacked is free cash flow, because of heaving capital expenditures.” The investment publication also noted the overhaul unveiled last week in Barrick’s boardroom and the pending departure of founder Peter Munk.”
Canadian Natural (The gusher)
“This company has one of the best production outlooks among large North American energy outfits and could gush free cash flow after it completes an expansion of its oil-sands facility, scheduled for 2017.” Its shares have gained only 11 per cent this year, largely due to the discount on Canadian oil, but that discount could ease in 2014. As well, “a 60-per-cent dividend boost in October has brought the stock’s current yield to 2.4 per cent … Free cash flow could hit $5-billion annually by 20187, from $1-billion next year, once the Horizon oil-sands facility expansion is done.”
The non-Canadian stocks:
Citigroup Inc. (The world citizen)
“Well capitalized, Citi has the best international franchise among major banks. It also has a cheap stock. At $51, it trades for less than 10 times projected 2014 earnings of $5.41 a share and below its tangible book value of $54.52."
Deere & Co. (The bread maker)
“The long-term outlook for Deere is good because a rising global population will need more food … Deere is the kind of company that Warren Buffett probably would love to buy if it because available.”
General Motors Co. (The new car salesman)
“GM has $15-billion of net cash (after subtracting debt and preferred) and is generating $8-billion of free cash flow annual. Initiation of a 1-per-cent to 2-per-cent dividend is a good bet for next year.”
Intel Corp. (The chip off the old block)
“At $24, Intel trades for 13 times projected 2014 earnings of $1.90 a share and yields 3.7 per cent … There are signs that the PC market is bottoming, and Intel is moving aggressively into tablets and smartphones.”
MetLife Inc. (The elder statesman)
“MetLife could rise into the $60s in 2014 if earnings estimates pan out and it gets the regulatory OK to start buying back stock and to lift its dividend. Bulls think the payout could rise about 50 per cent, the yield to 3 per cent from the current 2 per cent.”
Nestlé SA (The rich choice)
“The world’s largest food outfit has one of its industry’s best growth outlooks, thanks to a big presence in the developing world … Nestlé isn’t cheap, but it rarely is a bargain … Nestlé trades at only a small premium to slower-growing U.S. food outlets.”
Simon Property Group Inc. (The shopaholic)
“Despite the growth in online retailing, Americans still like shopping at malls … Simon (SPG) looks inexpensive, trading at about $151, down from a spring peak of $180. In October, it boosted its quarterly payout to $1.20 a share, 9 per cent above the year-earlier level.”
US Airways Group (The frequent flier)
“This airline may be the latest beneficiary of industry consolidation, now that the government has cleared its controversial merger with American Airlines. Shares of the carrier, which will emerge as the world’s largest airline, trade at about $22, less than 10 times estimated 2014 profits of $2.45 a share (assuming a full tax rate).”
Housing starts dip
New home construction in Canada seems to have found its level.
As The Globe and Mail’s Tara Perkins reports, housing starts in Canada dipped in November to an annualized pace of 192,235, compared to October’s 198,161.
The pace of construction starts in major centres rose in British Columbia and in the Prairie provinces, and declined in Ontario and the eastern regions, according to Canada Mortgage and Housing Corp. today.
“Over the last six months, housing starts look to have stabilized in the 190,000 to 200,000 range, a high level of activity relative to underlying household formation (closer to 185,000),” said Emanuella Enenajor of CIBC World Markets.
Ontario won't intervene
BlackBerry Ltd.'s home province probably won't intervene if the company is broken up and sold in pieces, Ontario's Economic Development Minister said today.
“I don’t think we are going to intervene in a business decision taken by the company,” Eric Hoskins said in an interview with The Globe and Mail's Paul Waldie in London, adding he is bullish on the company's future. “Our preference is for BlackBerry to remain its own entity and to remain in Ontario.”
Mr. Hoskins was in London to meet business leaders and speak at a conference. He said his message to the summit will be that BlackBerry has a “strong future” and that it has helped create a thriving “ecosystem” for high tech companies in Ontario.
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