Skip to main content
The Globe and Mail
Get full access to globeandmail.com
Support quality journalism
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
The Globe and Mail
Support quality journalism
Get full access to globeandmail.com
Globe and Mail website displayed on various devices
Just$1.99
per week
for the first 24 weeks

var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){console.log("scroll");var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))}pencilInit(".js-sub-pencil",!1);

Robert McWhirter is president of Selective Asset Management. His focus is on Canadian and tech stocks.

Top Picks:

Catamaran Corp. (CCT-TSX) ($12.5-billion market cap)

Story continues below advertisement

Catamaran is the industry's fastest-growing pharmacy benefits manager, helping organizations and the communities they serve take control of prescription drug costs. It is managing more than 350 million prescriptions each year on behalf of over 32 million members. Catamaran processes one in every five prescription claims in the U.S. It produced $587-million of free cash flow in the past 12 months (4.7-per-cent FCF trailing yield). Earnings are forecast to grow 21 per cent and 34 per cent in the coming two quarters. The stock appears to be breaking out of the $40 to $60 band that it has traded in over the past 3 years.

Celestica Inc. (CLS-TSX) ($2.1-billion market cap)

Celestica is cheap at 6.3 times enterprise value to last 4 quarters of EBITDA, .3x ev/sales. The company is also profitable: 13-per-cent ROE forecast for their 2015 calendar year. It has hidden assets: cash of $574-million is 27 per cent of market cap and land at Don Valley Parkway and Eglinton is worth a lot. Massive free cash flow generation: 8 per cent for the most recent 4 quarters: $164-million. It has an attractive stock chart, which looks like it's breaking out.

Sandvine Corp. (SVC-TSX) ($487-million market cap)

Sandvine uses deep packet inspection (DPI) for network policy control solutions to add intelligence to fixed, mobile and converged communications service provider networks to enable services that can increase revenue and reduce network costs. The transition to 100GbE provides an opportunity. 100GbE is faster than the current standards of 10GbE and 40GbE and is starting to get adopted by service providers. Currently, only Allot and Sandvine are shipping products to address this segment. Compared to competing products, however, Sandvine's solution is smaller and more energy efficient.

Sandvine has 19-per-cent forecast ROE, 5.5-per-cent free cash low yield, $162-million cash on hand = 33 per cent of market cap. Sandvine appears cheap: P/E to enterprise value (ev) of 9.4x versus 29-per-cent eps growth forecast and 7.5x ev to forecast cash flow growth of 32 per cent gives an ev to cash flow growth multiple of .24.

Past Picks: January 31, 2014

Story continues below advertisement

Alter NRG (NRG TSX) * 4-for-1 consolidator – June 30, 2014

Then: $0.88; Now: $2.64 -23.58%; Total return: -23.58%

FLYHT Aerospace Solutions (FLY TSX-Venture) *Sold early March @ $.54 (break-even)

Then: $0.54; Now: $0.39 +28.70%; Total return: -28.70%

Zecotek Photonics (ZMS TSX-Venture)

Then: $0.90; Now: $0.48 -46.67%; Total return: -46.67%

Story continues below advertisement

Total return average: -32.98%

Market outlook:

We are cautious on the outlook for Canadian equities in the coming year. Earnings estimates for the S&P/TSX composite index have been cut by 7.5 per cent and 11.2 per cent over the past sixty and ninety days. The forecast p/e multiple of 15.5 x for 2015 for the S&P/TSX composite index appears expensive relative to the modest 3.4-per-cent earnings growth forecast. We believe the sixteen year secular uptrend in commodities has ended and expect further commodity price declines to provide significant headwinds to S&P/TSX composite index in 2015 and beyond.

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies