Jim Huang is president of T.I.P. Wealth Manager. His focus is on North American equities.
Nexen is in the process of being taken over by CNOOC, a large state-owned integrated oil company from China. The approval process is well advanced, but is politically sensitive and is further clouded by the recent rejection of the PETRONAS-Progress Energy transaction. I believe this deal will eventually be approved given that most of Nexen’s assets locate outside of Canada and strengthening the strategic relationship with China is a high priority for the Canadian government. Implied return today is over 15 per cent, which is attractive.
Granite Real Estate
Formerly MI Development. With a new name, new management team and the upcoming conversion into a REIT, Granite is set to create shareholder value by reducing costs, effectively utilizing its vastly under-levered balance sheet to broaden real estate holdings and grow dividends. It has a healthy dividend yield now and the dividend is poised to grow substantially over time.
Canada’s pre-eminent oil sand player with premium portfolio of assets and a long operating history. Suncor is back on the profitable growth path after the integration of Petro-Canada is completed and debt is being paid down through successful asset sales. Operational difficulties are being overcome and current oil price and refining margins make it a great free cash flow generator with good growth. Unrest in the Middle East should not have a big impact on the company.
Past picks: Nov. 14, 2011
Total return: +36.12 per cent
Total return: +8.84 per cent
Granite Real Estate
Total return: +16.33 per cent
Total return average: +20.43 per cent
2012 has been a year of big swings. After a strong start markets sold off as the European financial crisis retook center stage and economies in the U.S. and China slowed down. As was the case in the last few years, global central bankers once again rode to the rescue, this time it was the European Central Bank and its infamous “Believe me, it will be enough” stance. Whatever occurs in the upcoming U.S. election, there exist sufficient political will and financial firepower globally to prevent the worst case scenario from happening. U.S. and Chinese growth is also set to stabilize and reaccelerate as policies become more stimulative. The outlook for the markets near term is reasonably positive; however, serious long term challenges remain that until resolved will prevent a secular bull market from taking place.
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