Barry Schwartz is vice-president and portfolio manager at Baskin Financial Services. His focus is North American equities.
There are a number of catalysts that could propel GM's stock much higher. GM trades at a cheaper valuation than its peers, yet offers the potential for faster earnings growth. It is generating significant free cash flow which will be available to restart a dividend or buyback shares. China and Europe seem to be rebounding and GM has significant exposure to those regions.
Once a high flying growth stock, Oracle now trades at a cheap valuation on earnings and free cash flow. Absent any major acquisitions, the company is on track to repurchase at least 5 per cent of its stock each year. Oracle recently doubled its dividend.
Hardwoods is a small-cap distributor of lumber products which is levered to U.S. housing starts. The company offers a cheap valuation, rising dividend and a clean balance sheet that can be used to make more U.S.-focused acquisitions.
Past Picks: September 12, 2012
Total return: +20.77 per cent
High Liner Foods
Total return: +90.45 per cent
NorthWest Healthcare Properties REIT
Total return: -13.18 per cent
Total return average: +32.68 per cent
We continue to find an endless supply of exciting investment ideas in this environment. Macro events can be unsettling, but they will not distract us and we will use volatility to our advantage. Our attention is focused on companies with a history of rising dividends, good balance sheets and low valuations with strong free cash flow. We favour North American equities that have exposure to the improving economic outlook. We continue to recommend a zero-weight exposure to metals and a limited allocation to resources. REIT's and other income-oriented securities are still recommended in moderation, but investors should beware of what will happen when rates get back to normalized levels.