Stan Wong is director and portfolio manager at Stan Wong Private Wealth, ScotiaMcLeod. His focus is on North American large caps and ETFs.
General Electric Co.
General Electric's stock is down over 9 per cent to start the year and presents a solid buying opportunity. GE is well-positioned for growth as global demand improves in longer-cycle infrastructure businesses such as power generation, aircraft engines, energy management and water processing. GE currently yields a 3.5-per-cent dividend that is expected to grow by over 10 per cent annually over the next few years.
Gilead Sciences Inc.
Gilead Sciences is one of the world's largest bio-pharmaceutical companies. The company's primary areas of focus include HIV/AIDS, liver disease and serious cardiovascular and respiratory conditions. Near-term, Gilead is expected to have tremendous revenue and earnings growth driven by the U.S. launch of its hepatitis C drug, which was approved in December 2013. Longer-term, GILD's hepatitis C drug will complement its market-leading HIV franchise. With an expected long-term earnings growth rate of about 30 per cent and a forward price-earnings multiple of 22x, this large-cap growth stock trades at a compelling valuation.
With over 20,000 stores operating in 63 countries, Starbucks is a premier large-cap growth name with one of the most recognized brands in the world. Starbucks' expansion into tea and juices along with premium baked goods is viewed very positively. Increased sales of Starbucks-branded K-Cups should also result in stronger revenues. Longer term, the company's continued store expansions in international markets, particularly China, India and Russia will drive a 15-per-cent or greater earnings growth profile.
Past Picks January 17, 2013
Then: $20.37 (U.S.); Now: $19.80; Total return: -1.95%
Then: $41.54 (Cdn); Now: $36.68; Total return: -8.37%
Then: $706.00 (U.S.); Now: $606.50; Total return: -14.06%
Total return average: -8.13%
Equity markets continue to frustrate investors who are under-allocated to stocks. After declining 5.8 per cent, the S&P 500 has retraced nearly 75 per cent of the recent consolidation in a matter of days. In less than a month, the current bull market in equities will be celebrating its fifth birthday. However, for 2014 equity markets will most certainly be more volatile and produce less robust returns than in 2013. Notwithstanding, we continue to believe that equities offer better value than bonds and suggest that periods of market weakness should be seen as opportunities to selectively add to stock exposures. Solid U.S. corporate earnings, a stabilizing European economy, a broadly accommodative monetary policy around the world and a recovering U.S. housing market are factors that should allow stocks to grind higher. Overall, our view is that the U.S. economy should grow by about 3.0 per cent this year. In our portfolio allocation, more economically-sensitive cyclical stocks are favoured over defensive stocks while U.S. and European equities continue to look more attractive compared to Canadian equities.