Barry Schwartz is vice-president and portfolio manager of Baskin Financial Services
Top Picks:
Astral Media
Astral Media generates significant cash flow and has been returning the cash to investors in the form of dividend increases, share buybacks and debt repayment. Astral Media recently raised its dividend 13 per cent and has a current yield of 2.9 per cent. This summer, Astral is set to release a product that may become a real threat to Netflix in Canada.
Methanex
Methanex continues to benefit from the demand for methanol in Asia as well as the rebounding global economy. The company is exploring options to increase its methanol production. Methanex has a good track record of increasing dividends, and its current yield is 2.6 per cent.
Teva Pharmaceuticals
Teva's stock was under pressure in 2011 as investors were concerned about competing products. Its current valuation, given its expected earnings growth in 2012, represents a compelling opportunity. The company has increased its dividend 12 years in a row.
Past Picks: Dec. 7, 2010
Aecon Group
Then: $9.85
Now: $11.25
Total Return: +17.41%
Onex Corp.
Then: $28.70
Now: $33.39
Total Return: +16.85%
Northwest Healthcare Properties REIT
Then: $11.40
Now: $11.61
TR: +9.65%
TOTAL RETURN AVERAGE: +14.64%
Outlook:
Investors should be cautious when committing new capital to last year's winners. 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. For risk seekers, we see tremendous value in companies that have exposure to copper, coking coal, fertilizer and oil. Outside Canada, investors should consider adding health care and technology positions. Bonds are extremely unrewarding, and investors should lower their duration and increase their credit risk to get a satisfactory yield.
Compiled by Franklin Cameron/BNN Market Call Tonight
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