David Baskin is president of Baskin Financial Services. His focus is on North American large caps.
Top Picks:
CSX Corp.
CSX is a major U.S. rail carrier serving 23 central and eastern seaboard states. The company has revenues of over $11-billion (U.S.) and is increasing both its earnings and its operating ratio. The U.S. rail system is operating at near capacity, giving carriers pricing power. Higher costs for fuels including diesel make rail and intermodal services more cost effective for shippers.
Cineplex
Cineplex sailed through the recession with higher attendance, higher ticket prices and higher concession sales. In spite of a weak movie lineup in late 2011, the company grew earnings last year and will likely do so again in 2012. Conversion to digital projection will increase viewing quality and reduce expenses. The dividend yield of 5.1% is expected to grow and share buybacks are also a strong possibility.
Bank of Nova Scotia
Will likely have the strongest growth of any of the big Canadian banks in 2012 and 2013, driven by superior international results. Currently trading at around 10.5x 2012 earnings, there is room for multiple expansion as well, leading to a projected all-in return in the 20% to 30% range for 2012. A dividend hike is also possible in the later part of the year.
Past Picks: Feb. 8, 2011
Canadian Apartment Properties REIT
Then: $17.79
Now: $22.75
TR: +34.91%
Canada Real Return Bonds 4.25% 12/01/21
Then: $132.739
Now: $143.85
TR: +14.30%
Suncor Energy
Then: $40.45
Now: $34.50
TR: -13.67%
OUTLOOK
North American economies will continue their slow expansion in 2012. Corporate profits will also show slow growth but low valuations, which have persisted since the 2008 crash and will allow for good returns on quality companies. We expect to see some rotation away from the low-volatility, high-dividend payers which led the market in 2012, as valuations for some of these stocks are now at the high end of the historic range. In Canada the banking, agricultural commodity and oil sands sectors are promising. In the U.S., many large- cap consumer branded products and technology companies remain attractive even after recent gains.
Compiled by Franklin Cameron, BNN Market Call Tonight
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