Christine Hughes is president and chief investment strategist at OtterWood Capital Management. Her focus is North American equities.
Paramount Resources (POU TSX)
Paramount is a tremendous liquids growth story backed by the Riddell family. The company has spent substantial amounts of money on infrastructure and now have significant runway to drill and realize cash flow. Seven Generations, a private peer, will likely IPO by year-end which should make the market pay attention to Paramount's asset quality.
Covanta Holding (CVA NYSE)
Covanta is a great cash flow story. The company makes money two ways: as a traditional garbage dump, but also by turning waste into energy (more environmentally friendly than letting waste turn into methane). Higher electricity prices are helping the company, and further spikes would mean higher revenue in the future. There is potential for the company to announce a new contract on an Irish facility in the next 3-6 months which would make a meaningful increase to cash flow.
InterTape Polymer (ITP TSX)
InterTape is a great turnaround story. The company produces tape, films and other woven materials for a variety of uses (tape is 65 per cent of sales). They are the dominant player in the markets they participate in (generate 60 per cent of sales from products where they are #1 or #2). The company has been on a mission to increase margins, close/move plants, and drop lower margin items. Balance sheet strength creates flexibility; recently doubled the dividend and instituted a buyback. We believe after their newest plant move is complete they either make an acquisition or increase the dividend/buyback.
Past Picks: December 10, 2013
BSM Technologies (GPS TSX-V)
Then: $3.19; Now: $1.96 -38.56%; Total return: -38.56%
DHX Media (DHX TSX)
Then: $4.72; Now: $8.17 +73.09%; Total return: +73.91%
Boyd Group Income Fund (BYD.UN TSX)
Then: $29.08; Now: $42.30 +45.46%; Total return: +46.86%
Total return average: +27.40%
With Europe starting up the printing presses in the exact same month the U.S. stops theirs (the anticipated plan is October, 2014) the world will continue to be supplied with huge amounts of money in the name of growth and inflation (Japan is printing as well). Now that European Central Bank president Mario Draghi is trying to stimulate growth, we may see Europe playing catch-up (worst performing region year to date), but our favourite region continues to be North American equities. However, until mid-October, we are in the thick of the seasonally tough period of time for stocks (it's U.S. midterm election year) so some caution is warranted. We are only partway through the U.S. economic cycle and further gains lie ahead.