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Manager sees market leading recovery Add to ...

Fund manager Heather Hunter expects the North American economies to rebound by the second half of 2002, and stock markets to reflect that recovery before it gets off the ground.

"If you look back to 1982 and 1991 [recessions] there was a significant bounce back," says the manager at Toronto-based AIM Funds Management Inc.

Stock markets have snapped back from their 52-week lows in the wake of the Sept. 11 attacks in the United States. The Toronto Stock Exchange 300 index has regained 16 per cent since its Sept. 21 low.

Ms. Hunter, who runs Trimark Select Canadian Growth Fund and held more than 15-per-cent cash in September, found lots of "quality stocks" at bargain prices following the market plunge. "Opportunities like that come along infrequently," she says.

The manager, who looks for value stocks with a three- to five-year time frame, found opportunities in various sectors, including communications, forest products and industrial products. Ms. Hunter says stocks she bought or added to existing positions that still "offer good value" include:

Quebecor World Inc. (IQW-TSE): The Montreal-based commercial printing giant, which closed yesterday at $33.56, traded at a 52-week low of $30.25 last month and a 52-week high of $42.65 in August. Ms. Hunter says the stock is off because of the weak economy exacerbated by the terrorist attacks. But she likes Quebecor World because it is an industry leader with good management, a strong balance sheet, excellent cash flow and a great track record of growth through acquisition. The stock is "attractively priced" and trades at five times enterprise value (market capitalization plus debt) to earnings before interest, taxes, depreciation and amortization (EBITDA), she says.

Domtar Inc. (DTC-TSE): The Montreal-based forest products company, which closed yesterday at $14.40, hit a 52-week low of $11 in January and a 52-week high of $16.46 in May. Ms. Hunter says Domtar, North America's second-largest producer of uncoated freesheet paper, has suffered because of the economic slowdown, but she believes it is well positioned for a recovery. She likes its management and the fact it is a low-cost operator. She bought Domtar recently when it issued new shares at $11.44 to help pay for its acquisition of four mills from Georgia-Pacific Corp. She says Domtar trades at 1.3 times book value and seven times normalized earnings of $2 a share "assuming a return to long-term average commodity prices."

SPX Corp. (SPW-NYSE); The Muskegon, Mich., maker of tools and equipment, which closed yesterday at $109.18 (U.S.), hit a 52-week low of $75 in September and a 52-week high of $130.05 in June. She says the stock has suffered since the terrorist attacks, but SPX has a "good track record for making acquisitions, taking costs out and improving efficiencies." She says the stock trades at more than 11 times estimated 2002 earnings of $8.82 a share, which includes $1.50 in amortization of goodwill as required by accounting rule changes.

Among stocks mentioned in an interview with Ms. Hunter for Best Bets on June 15 is Talisman Energy Inc. (TLM-TSE), which she continued to buy when it fell to the $48-to-$49 range (Canadian) in September. The stock has since rebounded and closed yesterday at $60.85.

Ms. Hunter still holds and likes Emerson Electric Co. (EMR-NYSE), CanWest Global Communications Corp. (CGS.A-TSE) and Norske Skog Canada Ltd. (NS-TSE). Best Bets outlines what money managers are buying and selling. swon@globeandmail.ca

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