John Zechner is chairman of J. Zechner Associates. His focus is on North American large-cap stocks.
Uranium One Inc.
This is a recent purchase, this week, at $1.81. Uranium spot prices are starting to move off their lows and volumes are starting to pick up. Long-term prices are holding at $60 (U.S.) per pound and longer-term supply-demand fundamentals favour higher prices. Uranium One has lagged the group's recovery due to being a large offshore seller but the company has a growing production profile and is one of the only larger, pure-play uranium stocks available.
Kinross Gold Corp.
Our most recent purchase was at $9 in late September. Gold stocks as a group have sharply lagged the upward move in gold prices as investors have gone to gold directly. Valuations are now more attractive than any point in the past 20 years. Kinross has a large and growing production profile, including the Tasiast property acquired two years ago with the buyout of Redback Mining. Management is also more focused on cost management and profitability than in the past.
Our most recent purchase was this week at $3.37. The stock has been hurt by worries about a delay of the C-Series jet but the company has secured additional orders recently and should have first test flights by mid-2013. Its transportation and private jet businesses continue to grow; the company has adequate liquidity with no major debt repayments due for four years. Stock valuation is near all-time lows at seven to eight times forward earnings and trades at a discount to industry comparables.
Past picks: Dec. 28, 2011
Suncor Energy Inc.
Total return: +14.37 per cent
Uranium Participation Corp.
Total return: –0.37 per cent
Manulife Financial Corp.
Total return: +31.81 per cent
Total Return Average: +15.27 per cent
We remain bullish on the outlook for stocks, particularly the cyclical and resource sectors which have fallen the most since hitting peaks in spring of 2011. Global economic growth is on a recovery path with China and other developing economies back on stronger expansion. U.S. economic growth is supported by recoveries in the housing and auto industries and Europe is seeing stabilization as it addresses structural reforms. Stocks continue to trade at all-time lows in terms of relative valuation to bonds, mostly due to public and institutional pension fund assets flowing from equities to fixed income. Interest rates should remain low but will rise slightly from current levels, which could result in money moving back to stocks from bonds. Canada has lagged behind global markets over the past 18 months and this gap should narrow. Overweight sectors in North America include basic materials, energy, industrials, technology and U.S. financials.