Gordon Reid is president and CEO of Goodreid Investment Counsel. His focus is on U.S. equities.
General Electric has quietly been restructuring over the past few years, ridding itself of non-core assets and returning to its industrial roots. These initiatives are beginning to pay dividends and Goodreid believes the stock will soon trade in line with the valuation multiples of its peer group, representing about a 15-per-cent positive adjustment. Going forward expect earnings to advance at a double digit clip.
Walgreen, the largest drugstore chain in the U.S., has a number of positive catalysts propelling growth. Customers continue to migrate back after the resolution with Pharmacy Benefit Manager, Express Scripts. Their non-pharmacy business is benefiting from new sales initiatives and earnings are getting a boost from the Boots acquisition.
Tenneco is a manufacturer of exhaust and ride-control systems. Trading at just 10 times our estimate for next year's earnings, this company has solid growth in front of it as emission standards change and the world automotive market recovers.
Past Picks: August 22, 2012
Total return: +27.52 per cent
Total return: -4.51 per cent
Total return: +31.65 per cent
Total return average: +18.22 per cent
Nervousness is increasing as the rationale for a market correction gains greater credibility. While it would be unusual not to correct over the next couple of months, it is Goodreid's opinion that the risk of foregoing the longer-term opportunity of a constant allocation to equities is greater than a possible benefit of market timing gains.