Mike Newton
Mike Newton is portfolio manager & director, wealth management, The Newton Group, ScotiaMcLeod. His focus is on North American large caps and ETFs.
Top Picks:
Qualcomm
China's rapid adoption of smartphones (including low end) poses a good opportunity for Qualcomm. It is expected that FCF will grow significantly as more of QCOM's designs get incorporated by Chinese device makers. QCOM currently has an attractive 7.4-per-cent FCF yield, and the company is committed to return 75 per cent of its FCF to shareholders.
WesternOne
WEQ provides specialized service and support businesses in construction and infrastructure. After a disappointing 2013 with pressured margins and weakness in its Australian business, the company is turning around with an 8.5-per-cent yield supported by a relatively comfortable 60-per-cent payout ratio. Its Britco segment is large and diversified and booked solid well into 2015 with recent awards including $100-million Devon Energy project in Alberta and the $207-million build for Manitoba Hydro.
Splunk
Undisputed leader in operational intelligence of the data analytic pure plays. Its software detects gridlock in a corporation's networks, and can massage data in innovative ways to improve organizational performance.
Past Picks: May 1, 2013
Aflac
Then: $54.38; Now: $63.04 +15.93%; Total return: +18.69%
American Express
Then: $68.28; Now: $90.03 +31.85%; Total return: +33.01%
WisdomTree Japan Hedged Equity Fund
Then: $46.8;7 Now: $47.34 +1.00%; Total return: +3.64%
Total return average: +18.45%
"Now" figures are intraday from the date of the analyst's appearance on BNN Market Call.
Market outlook:
At current valuation levels, equities appear fairly valued, with further upside coming mainly from earnings growth. A flattening yield curve is evidence that U.S. market dynamics have moved past mid-cycle, with the interest rate environment becoming less friendly and the risk-reward outlook for equities not as compelling. We continue to recommend holding higher than average cash balances in the near-term with an aim of buying equities on instances of broad market weakness. The current macro environment remains positive as economic data remains robust enough to give investors confidence in an economic recovery but not too strong as to force the Fed to aggressively change course in the near term. Unfortunately, periodic corrections occur because bad news causes most investors to freeze and miss the opportunity to buy on weakness. Find the right stocks now, no matter the style, to exploit the market's inefficiencies.