Darren Sissons is managing director at Portfolio Management Corp. His focus is on global large caps.
HSBC Holdings Plc
i) sustainable 4.2-per-cent dividend yield,
ii) strong balance sheet and no liquidity issues expected,
iii) now re-focusing on trade finance (import/export finance) in Asia, which should be a growth engine,
iv) like all banks will benefit from rising interest rates, and
v) attractively priced due to concerns around exposure to the risky European banking sector.
i) sustainable 2.7-per-cent dividend yield and solid balance sheet,
ii) astute management team that have added substantial U.S. annuity exposure at recession-level prices and therefore locked in a long-term profit stream at low risk levels,
iii) highly leveraged to growth in Asia as the Asian insurance and wealth management businesses are growing strongly, and
iv) management are considering an IPO spin-off for the U.S. business, which would crystallize value the market is not currently rewarding the company for.
i) sustainable 5.10-per-cent dividend yield,
ii) solid balance sheet,
iii) the company is transitioning itself from a large-cap into a mega-cap oil company through an aggressive expansion in both on-shore and off-shore oil exploration, and
iv) attractively priced due to lower near term oil price expectations and political risks associated with Syria
Past Picks: September 14, 2012
Then: € 29.65
Now: € 31.81
Total return: +11.45 per cent
Then: € 53.20
Now: € 68.48
Total return: +35.94 per cent
Total return: +24.20 per cent
Total return average: +23.86 per cent
We have just exited the slow summer period so valuations are generally off calendar year highs. October is often the worst calendar month annually for equities, so investors should have a little cash on the sidelines to take advantage of any sudden price declines.
On the markets, the U.S. appears to be transitioning away from defensive securities due to the high valuations and expectations of interest rate increases. However, given a very modest outlook for growth in the U.S. over the next few years, the most likely catalysts for higher American stock prices will be funds flowing out of fixed income into equities. European markets are generally moving higher for reasons I don't fully comprehend. The recessionary grip remains, unemployment is high across the region, government austerity programs have been introduced and growth will be anemic for the next few years. European based companies with exposure beyond the Eurozone core and periphery are likely to perform better than Eurozone-focused companies. Latin America ("LatAm") is slowing on the back of a weaker outlook for commodities. Inflation is rampant in some markets and I fear the LatAm markets in general will move a little lower over the near term. Once a bottom is hit, LatAm will offer some interesting opportunities. Asia is an interesting place now. Valuations have come down as fund managers are re-allocating capital back to the U.S. Asian currencies are generally lower as well. Consequently, inexpensive Asian growth can now be added to the portfolio. For those with a strong risk appetite India is currently on sale.