Barry Schwartz is vice-president and portfolio manager with Baskin Financial Services. His focus is on North American large caps.
Top Picks:
SNC Lavalin
Look past the recent negative headlines on SNC, and you will find a company trading at a 25% discount to its U.S. peers. This company continues to bid on a record number of engineering and construction contracts. We expect SNC to raise its dividend for its 11th consecutive time when it reports earnings next month.
Cisco Systems
Cisco's recent business restructuring is starting to payoff. Not only has Cisco successfully defended its market share against fierce competition, it also has been able to improve its operating margins. Cisco trades at a low valuation despite double-digit earnings and dividend growth in 2011.
Home Capital Group
While commentators and economists continue to fret about the health of the Canadian housing market, Home Capital continues to deliver stellar earnings. A low interest rate environment combined with a modest expansion of the Canadian economy should lead to another strong year for the Canadian housing market. Home Capital should benefit as a result and earn record earnings this year.
Past Picks: Jan. 26, 2011
Empire Company
Then: $52.61
Now: $56.33
Total return: +8.74%
Thompson Creek Metals
Then: $13.89
Now: $8.98
Total return: -35.34%
Kraft Foods
Then: $31.03
Now: $38.72
TR: +29.07%
Total return average: +0.82%
OUTLOOK
With clear signs that the U.S. economy's growth is accelerating in 2012, investors are advised to step on the gas with respect to their own portfolios. Many defensive stocks that deliver predictable dividends are clearly overvalued and could be at risk to rising interest rates as well as sector rotation. Instead of chasing high yielding stocks and REIT's, we recommend that investors look to buy companies that are trading at low valuations and have the ability to show above average earnings growth and rising dividends. Our favourite sectors right now are Canadian financials, both Canadian and U.S. industrials and U.S. technology. Bonds should be avoided at all costs. After taking into account inflation and taxes as well as the risk of rising interest rates, we are certain that bonds will be the worst performing asset class over the next few years.
Compiled by Franklin Cameron, BNN Market Call Tonight
____
Also see: