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Darren Sissons is Managing Director at Portfolio Management Corp. His focus is Global large caps.

Top Picks:

BB&T Corp.

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fund and family ownership; last purchase US$37.75/share.

  • 1) progressive dividend currently yielding 2.5 per cent,
  • 2) reasonable balance sheet,
  • 3) strong risk culture as the bank did not get into subprime trouble,
  • 4) leveraged to eastern U.S. business growth, employment improvements and better commercial and residential real estate markets, and
  • 5) like all banks, the company will benefit from higher interest rates, which we don’t currently have but will eventually endure.

Carlsberg

family & fund ownership; last purchase US$20.24/share.

  • 1) progressive dividend, currently yielding 1.5 per cent, that has grown at an average of 5.4 per cent per annum for 31 years,
  • 2) strong balance sheet that will strengthen going forward,
  • 3) an expanding and fast growing Asian footprint, and
  • 4) it’s currently on sale because of its Russian exposure due to the political crisis in the Ukraine. 

Teck Resources

fund ownership; last purchase C$27.46/share.

  • 1) safe 3.5 per cent dividend,
  • 2) good balance sheet,
  • 3) diversified miner leveraged to met-coal, copper and zinc. Also has oil sands exposure via 20-per-cent ownership of Fort Hills Sand Project (with Suncor), 
  • 4) China is key to unlocking commodity demand and to higher commodity prices, and
  • 5) due to the high level of investor pessimism over  future commodity prices the company is attractively priced.

Past picks: Feb. 13, 2013

Corning

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Then: $12.78 (U.S.); Now: $19.54, +52.90%; Total return: +57.84%

Callaway Golf

Then: $7.10; Now: $8.00, +23.94%; Total return: +24.80%

Wm. Morrison Supermarkets

Then: £259.80; Now: £236.50, -8.97%; Total return: -4.54%

Total Return Average: +26.03%

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Market outlook:

While we generally agree that the U.S. recovery is on track, we are surprised by the moves of the U.S. market given the fundamentals and think valuations are priced for perfection. The U.S. macro outlook is still quite bleak.  Unemployment remains stubbornly high and the household savings rate is disappointing.  Small business creation, historically the job creation engine for the U.S. post a recession, remains at relatively low level.  Corporate America cut deeply into its labour force during the financial crisis and the corporate labour force is still relatively over-utilized (.e one person is still in many cases doing the job of two.)  Given these headwinds, job creation will continue to be subdued, which supports continued weak consumer demand and limited upside for corporate profits.

Europe has hit bottom, which is great news  but like the U.S. valuations are a little stretched.  The one area of opportunity is countries with Russian or Eastern European exposure due to the political crisis in the Ukraine.  Asian valuations are attractive in a range of markets as the hot money flows that drove Asian valuations and currencies to unsustainable levels has now left to chase the 2-per-cent growth of the U.S. and the cyclical recovery trade in Europe. For value investors like us, Asia with its high growth rates offers a range of opportunities.  For now we are staying away from Latin America due to the macroeconomic headwinds and the challenges relating to government interference in the private sector. However, valuations are attractive and we expect to re-visit this region in 2015.

Editor's note

Due to an editing error, an earlier version of this article included information from Mr. Sissons' previous contribution in December, 2013.

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