BNN Market Call – Michael Sprung’s Top Picks and Outlook

Market Outlook:

Despite a strong start in January, global stock markets became unnerved in the latter part of the first quarter of 2018. Rising trade tensions contributed to the unease investors exhibited as the US took a stronger stance on bilateral trade negotiations through the enactment of targeted tariffs. In addition, inflation and rising interest rates caused concern amongst investors. The dominant technology stocks that had been largely contributing to the markets’ advance came under pressure as political scrutiny prompted calls for greater regulation in the industry.

Michael Sprung, BNN, Market Call - Top Picks: Enercare, ECI, Royal Bank, RY, Vermillion Energy, VET

Michael Sprung on BNN’s Market Call – Top Picks: Enercare, ECI, Royal Bank, RY, Vermillion Energy, VET

Whether or not the above factors are indicative of a protracted market downturn remains to be seen. Certainly we have been of the opinion that valuations have been stretched following ten years of market advances. In this environment, value rather than momentum will become more important in stock selection. Investors should continue to seek well financed, well managed companies that are selling at attractive price levels.

Top Picks:

Royal Bank, RY-T, Owned personally and by clients, Last purchase September 16, 2016, $80.55
The Royal Bank is Canada’s largest financial institution that ranks within the largest twenty banks in the world with extensive domestic and wealth operations as well as global banking, capital markets, custody and brokerage networks. Highly profitable domestic operations are funding both domestic and global expansion as well as greater returns to shareholders. In the most recent quarter, the dividend was increased by 3%. With the recent pullback in the price of the stock, the yield is currently 3.9%.

Vermillion Energy Inc., VET-T, owned personally and by clients, Last purchase March 2, 2018, $40.85
Vermilion Energy has interests in oil and gas producing properties in Western Canada, France, Germany, the Netherlands and Australia as well as a substantial non-operated interest in the Corrib natural gas field off the northwest coast of Ireland. Vermilion is well managed with a solid balance sheet. At today’s commodity prices, Vermilion generates free cash flow that supports the current yield of 6.3%. The dividend was recently increased by 7% to $0.23/month. Its geographically diversified operations should contribute to a growing production profile over the next few years.

Enercare Inc., ECI-T, Owned personally and by clients, Last purchase March 7, 2018, $18.16
Enercare is a leading provider of water heaters, water treatment, furnaces, air conditioners and other HVAC rental products, plumbing services, protection plans and related services. With operations in Canada and the United States, Enercare serves approximately 1.6 million customers annually. Enercare is also the largest non-utility sub-meter provider, with electricity, water, thermal and gas metering contracts for condominium and apartment suites in Canada and through its Triacta brand, a premier designer and manufacturer of advanced sub-meters and sub-metering solutions. With the recent increase in the dividend by 4% to $0.0832/month, the stock yields 5.8% at current prices.

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

 

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