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

Outlook:

Global markets were mixed in the second quarter of 2017. The US market recorded another positive quarter, albeit half as robust as the prior quarter. European markets managed to eke out a modestly positive quarter in spite of a large decline in June following the inconclusive UK election. Asian markets were very strong due to trade in information technology and a positive election result in South Korea. Resource heavy markets such as those of Latin America, Australia and Canada were not as fortunate and generally posted negative returns in the quarter.

Michael Sprung Top Picks AGT, AGT Food and Ingredients, ECA, Encana, Royal Bank, RY

Michael Sprung’s Top Picks: AGT Food and Ingredients, Encana, Royal Bank

Towards the end of the quarter, the Central Banks in Canada, Europe and the US were taking a more hawkish tone insofar as hinting that economic conditions have improved to the point where interest rates may be raised in the near future. It remains to be seen how the economies may react to rising rates. Recessions are more often than not predated by rising interest rates. 

As we enter the third quarter, investors are focusing on the the global trade dynamics. The US has made it clear that they are not happy with the current terms of trade worldwide. Europe is also facing negotiations with Britain on trade policies as their departure from the European Union nears. The recovery since the end of the last financial crisis ten years ago has been slow and tepid while the duration has been much longer than most. Markets have generally performed very well throughout the period without a major correction. In fact, it has been over a year since we have seen a 5% pullback. Given all of the dynamics of rising rates, trade policies and othe geopolitical issues, we would suggest that this is a time to be very cautious.

Top Picks:

Royal Bank of Canada, RY, Owned personally and by clients, Last purchase September 16, 2016, $74.45
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. At current prices, the stock carries a yield of 3.7%

Encana Corp, ECA, Owned by clients, Last purchase September 15, 2016, $12.70 
Encana is a leading North American energy producer focused on a diverse portfolio of resource plays producing natural gas, oil and natural gas liquids. Over the past four years, Encana has improved operational efficiencies, focused on capital allocation and costs and carried out over $20 billion in acquisitions and divestitures. The asset base has been significantly upgraded and the balance shhet is stronger. Over the next five years, Encana has ambitious goals to increase production and profitability. Much has been accomplished to reposition the firm to compete in a lower pricing environment.

AGT Food and Ingredients, AGT, Owned personally and by clients, Last purchase December 12, 2014, $26.50
AGT is a leader in pulse processing for export and domestic markets.  The company has had notable success in diversifying into food ingredients, an area that is facing increasing global demand. AGT has been expanding its pulse handling and food ingredient production capability. India has extended, for the fifth time,  AGT's ability to import wheat/pulses to December 31. While pulse markets have been less robust than anticipated thus far in 2017, this is a short term issue. As the market normalizes and management exploits opportunities in bulk handling and food, we anticipate that the stock will recover and prosper.

View the complete MarketCall interview here>>

What is Successful Investing? Learn more here>>

We believe that investment management is about managing risk, not chasing speculative returns. Like to learn more? Please contact us here>>

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.  

Market Outlook & Top Picks – BNN Market Call

BNN Market Call – Outlook

After a troubling start to the year, recent rallies have pulled North American markets into positive territory. The same cannot be said in much of the rest of the world. While this respite in North America, and particularly Canada, has given investors some relief, the outlook going forward is far from certain. Many geopolitical and economic factors have yet to play out and have the potential to bring both positive and negative market reactions. Just last week we were reminded that terrorism is still with us as the attack on Brussels illustrated. Unrest is not just confined to the Middle East. Europe is still contending with the mass influx of refugees as well as economic tensions threatening the very existence of the European Union. Tensions in Russia/Ukraine, China and its neighbours, Brazil and Venezuelan political instability continue to persist.

In Canada, we are fortunate to be situated so close to the United States as their economy appears to be stronger and growing. This benefit is evident in the improving export of goods and services from Canada to the US.

Michael Sprung BNN Market Call Interview Market Outlook Top Picks

Michael Sprung BNN Market Call Interview: Outlook and Top Picks

In this environment we would advise caution. In many cases, the rally in share prices has, from our view, caused us to stand back as we are confident that more opportunities will become available as the year progresses.

BNN Market Call – Top Picks

Royal Bank, RY-T, Owned by clients, Last Purchase January 28 2016 @ $67.75

The Royal Bank is Canada’s largest financial institution with extensive domestic and wealth operations as well as global capital markets, custody and brokerage networks.

In the last quarter, Royal completed its acquisition of City National Bank, which has contributed to higher earnings in wealth management. Royal’s diversified business model and strong capital base will support earnings and dividend increases going forward.

Precision Drilling, PD-T, Owned by clients, Last Purchase September 23 [email protected] $5.00

Precision is the largest oilfield services company in Canada with operations domestically, in the US and internationally. The company has a marketing alliance with Schlumberger, whereby Precisions Tier 1 drilling rig offerings are paired with Schlumbergers state of the art assembly and services. The high grading of the fleet over the past few years has left precision with the best fleet in Canada. The Company has a reasonably strong balance sheet that combined with the superior rig fleet and large geographic footprint, should sustain the company through the recent malaise in the industry. The stock is attractive at current levels.

Stuart Olsen Inc., SOX-T, Owned by clients, Last purchase October 5 2015 @$5.49

Stuart Olson Inc, formerly The Churchill Corporation, is one of Canada’s largest construction firms providing general contracting and electrical building systems contracting in the institutional and commercial construction markets as well as electrical, mechanical and specialty services in the industrial construction markets. The stock has underperformed the market and its peers as investors have focused on its exposure to Western Canada. Going forward, there are plans by the governments of Alberta, Saskatchewan and BC, as well as the Federal government, to dramatically increase spending on infrastructure. At the end of the fourth quarter, SOX had a backlog of $1.96B(58% construction, 28% cost-plus, 5% design build and the rest in tenders). The Industrial Services Group while exposed to the oil sands, derives its revenue from maintenance, repair and operations in the energy, mining and hydro industries. Stuart Olsen has a good balance sheet. The dividend currently yields 7.2%.

You can view the complete Market Call interview here>>

You can view Michael’s past interviews here>>

What is Successful Investing? Learn more here>>

We believe that investment management is about managing risk, not chasing speculative returns. Like to learn more? Please contact us here>>

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.

 

Canada Stockwatch – RBC Fined $1m For Lack Of Supervision in Sale of Reverse Convertibles

Canada Stockwatch – A Royal Bank of Canada (TSE:RY, Mkt cap 115.88B, P/E 12.79, Div/yield 0.77/3.84, EPS 6.28, Shares 1.44B) unit has been ordered to pay US$1.43 million after it was found to have failed to assess whether reverse convertibles were suitable for investors prior to selling them.

Canada Stockwatch Royal Bank Canada ordered pay $1.43 million

Canada Stockwatch – A Royal Bank of Canada unit has been ordered to pay US$1.43 million.

As Reuters reports, the Financial Industry Regulatory Authority (FINRA) has told RBC Capital Markets LLC it must pay a fine of US$1 million, in addition to US$434,000 of restitution.

RBC was not prepared to admit or deny the charges following last week’s settlement, but it has agreed to pay the amounts ordered of it.

Reverse convertibles, which are sometimes called reverse exchangeable securities, usually comprise interest-bearing notes in which repayment of principal depends on the performance of an unrelated asset, such as a basket of stocks.

Due to the uncertain nature of whether they will earn their principal, as the unrelated asset’s value could drop below a certain “knock-in” or “barrier” level, the securities carry potentially high yields for investors.

FINRA revealed that in the four-year period from 2008 to 2012, RBC was accountable for more than 100,000 reverse convertible transactions in at least 5,000 accounts, but it did not carry out the necessary checks to see if they were all suitable based on customers’ investing targets, net worth and experience.

This oversight led to US$1.1 million of losses on 364 reverse convertible transactions in 218 accounts belonging to customers for whom the securities were not well matched, the regulator said.

A class-action lawsuit against RBC resulted in the bank paying some affected customers a sum for their losses, while FINRA has ordered restitution for the remainder.

RBC Wealth Management, a unit of RBC Capital Markets, responded to the charges in a statement, saying it began making the necessary improvements to ensure proper supervision and controls in 2013.

Canada Stockwatch – RBC recently raised its quarterly dividend by 2.7%, to $0.77 a share from $0.75. The new annual rate of $3.08 yields 3.8%. The stock trades at just 11.6 times Royal’s forecast 2015 earnings of $6.54 a share.

What is Successful Investing? Learn more here>>

Download Our Free Special Report – How to Hunt For Value Stocks. Michael Sprung will share with you 5 stocks set for long-term gains here>>

We believe successful investors must challenge the market consensus by maintaining an independent point of view.

Like to learn more? Please contact us here>>

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.

 

Michael Sprung on BNN Market Call, February 25, 2015

Top Pick Sales:

Agrium Inc. (TSE:AGU, Mkt cap 20.54B, P/E 19.86, Div/yield 0.97/2.71, EPS 7.25, Shares 143.73M) We scaled back in a few accounts where weight had become larger than desired due to recent price appreciation.  Still owned in many accounts.Sold at $143.12 on February 24, 2014.

Market CallTop Picks Michael Sprung Royal Bank

Top Picks:

Royal Bank of Canada (TSE:RY, Mkt cap 112.31B, P/E 12.97, Div/yield 0.75/3.85, EPS 6.01, Shares 1.44B) Owned by clients, Last Purchase September 10, 2014: $81.15

The Royal Bank is Canada's largest financial institution with extensive domestic and wealth operations as well as global capital markets, custody and brokerage networks.  The positive results in the most recent quarter are illustrative of the strength of a well diversified and managed company.  Longer term, we expect  Royal Bank to prosper and provide further dividend enhancements.

HudBay Minerals Inc. (TSE:HBM, Mkt cap 2.49B, P/E – , Div/yield 0.01/0.19, EPS -0.25, Shares 233.62M) Owned by clients, Last Purchase September 10, 2014: $10.96
 HudBay Minerals is one of Canada's leading producers of zinc, copper and precious metals with operations in Canada, Peru and the US.  Constancia, a major copper-molybdenum-silver mine in Peru, will be ramping up production over 2015.  With other project coming onstream over the next few years, we anticipate that valuation levels will increase.

Aecon Group Inc (TSE:ARE, Mkt cap 665.52M, P/E 21.44, Div/yield 0.09/3.05, EPS 0.55, Shares 56.45M) Owned by clients, Last Purchase December 1, 2014, $11.57
Aecon Group is one of Canada's largest construction companies.  A large portion of Aecon's business is related to the energy sector and the company's stock price has been under pressure as a result.  Over the last number of years, management has taken steps to strengthen the financial position of the company.  At current prices, the stock presents good value to investors for longer term appreciation.

Outlook:


Geopolitical concerns (Ukraine/Russia, ISIS in the Middle East, etc.) are still prevalent but investors' concerns  are becoming more focused on the fallout of weak oil prices, low inflation (possibly deflation), and, weak demand for goods and services.  The US dollar continues to dominate currency markets reflecting the relatively strong fundamentals of the US economy while the European and Japanese economies are weak and the growth in China has been less than expected.  While low oil prices may ultimately benefit oil importing countries,  oil exporters are feeling the pinch and Canada is no exception.  As the impact of the weakening energy sector reverberates throughout the Canadian economy, the stock market in Canada will continue to exhibit higher volatility for the next number of months.  During this period, investors would be well advised to to position their portfolios in companies with strong financial positions that will weather the storm and ultimately benefit from the opportunities presented by weaker companies' distress.

You can view this and previous Market Call interviews here>>

What is Successful Investing? Learn more here>>

Download Our Free Special Report – How to Hunt For Value Stocks. Michael Sprung will share with you 5 stocks set for long-term gains here>>

We believe that investment management is about managing risk, not chasing speculative returns.  

Like to learn more? Please contact us here>>

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.

 

Stockwatch – Royal Bank of Canada Posts Record Annual Profit

Stockwatch – Royal Bank’s capital markets’ lending is up 21% year-over-year.

Stockwatch – Royal Bank of Canada (TSE:RY, Mkt cap 115.95B, P/E 13.81, Div/yield 0.75/3.73, EPS 5.82, Shares 1.44B) has announced a record annual profit of $9 billion despite missing capital markets forecasts, which analysts say is a sign of “enterprise strength”.

Stockwatch Royal Bank capital markets lending up 21%

Stockwatch – Royal Bank’s capital markets’ lending is up 21% year-over-year.

As the Financial Post reports, the Toronto-based bank has capped off its most profitable year to date with solid fourth quarter earnings, which were boosted by personal and commercial banking net income.
For the quarter ended October 31, the bank reported net income of $2.3 billion, or $1.57 a share on a fully diluted basis. That’s up 11% compared with $2.1 billion, or $1.39 per share, a year earlier. Cash diluted earnings per share were $1.59.
Personal and commercial banking accounted for $1.15 billion of the figure for net income, which represents an 8% rise from a year earlier. Wealth management profit climbed highest of all its divisions, jumping 41% to $285 million in the past 12 months.
The bank’s capital markets segment, however, fell significantly during the quarter with net income falling 14% from last year to $402 million.
However, Royal Bank was not the only institution to find life difficult in capital markets, with the Bank of Montreal running into similar problems in that side of the business.
As Dave McKay, RBC president and CEO, also pointed out, the bank’s capital markets’ lending business may have dropped compared with the last quarter, but it is still up 21% year-over-year.
“We delivered another strong quarter of earnings growth, demonstrating the strength of our retail businesses and capital position, as well as our continued focus on efficiency management activities,” he said.
Stockwatch – Royal’s 2014 per-share earnings should rise 10.6%, to $6.13 from $5.54 in 2013.

We believe that successful investors focus on the quality of the assets they buy. Speculators focus on guessing the future prices.
We believe that the success of a particular investment is always relative to the price you paid.
Like to learn more? Please contact us here>>
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.