Don Lato is president of Padlock Investment Management. His focus is on North American equities.
Walgreen Co. (WAG NYSE)
Walgreen sold off dramatically following the news that it would not use a "tax inversion" for its purchase of Boots Alliance. Although guidance was lowered, the stock price decline allows for an attractive entry point for this global pharmacy giant. Currently priced at 16.5 times August 2015 earnings which is less than the market multiple with superior growth prospects.
Parex Resources (PXT TSX)
Parex has performed extremely well since last recommended as a "top pick" in November. The company has guided that daily production in 2013 of 15,800 boe/day will increase 40 per cent to over 22,000 for 2014 and exit the year at 27,000. Cash flow for 2014 expected to exceed $3.00 per share for a P/CF multiple of 4.6X.
Littelfuse (LFUS NASDAQ)
As its name suggests, Littelfuse is one of the world's largest manufacturers of "fuses". The company's circuit-protection devices are used globally in the automotive, electronics and electrical markets. With the growth of electronics in both automotive applications and consumer electronics, Littelfuse is well positioned to continue the high teens growth rate it has enjoyed for the last 10 years while being very reasonably valued at less than 17 times 2015 earnings.
Past Picks: August 26, 2013
Apple Inc. (AAPL NADAQ) Stock Split 7-for-1 on June 9, 2014
Then: $502.97; Now: $102.25 +42.30%; Total return: +45.52%
Tricon Capital (TCN TSX)
Then: $5.86; Now: $7.67 +30.89%; Total return: +35.10%
Canadian Natural Resources (CNQ TSX)
Then: $31.43; Now: $46.72 +48.65%; Total return: +51.67%
Total return average: +44.10%
Equity markets have continued to reach new all-time highs during a traditionally slower seasonal period. Earnings growth in the second quarter was very strong in both the Canadian and U.S. markets thus allowing the indexes to rise without further multiple expansion. Padlock remains constructive on the equity markets as traditional warning signals such as investor euphoria, recession fears and an inverted yield curve among others, have yet to appear. With investors and corporations holding massive amounts of cash and continued low yields offered on alternative investments, the equity market is still only in the sixth or seventh inning of a 9 inning game.