Market Outlook & Top Stock Picks
Michael Sprung‘s market outlook: The third quarter of 2012 has been characterized by rising stock markets despite slowing and/or deteriorating economies globally. Commodity prices have generally advanced underpinning some of the positive movement in the Canadian market. Be prepared for some negative volatility going forward. Concentrate on financially strong companies that can endure. Have reserves ready to buy shares in these companies during setbacks.
Sunlife (SLF-T): Owned personally and by clients; last purchase June 18 2012 $21.63 Under the direction of Dean Conner, CEO, Sunlife has been at work de-risking the US variable annuity business, putting resources towards MFS, selling off UK exposure and exiting many unprofitable business lines. A more benign interest rate and equity market environment will result in higher levels of profitability in the future. At current prices, the stock is attractive.
Encana (ECA-T): Owned by clients, Last Purchase September 22, 2011 $20.61
Encana is one of North America’s largest natural gas producers with an enviable stable of assets extending from British Columbia to Texas and Louisiana participating in many of the key sectors including the Barnett Shale, Montney, Horn River, Piceance and Haynesville. Weak natural gas prices have negatively impacted the share price. Rising demand over the next few years should be reflected in future valuation. The dividend yield is close to 3.6%.
George Weston (WN-T): Owned by clients, last purchase March 29 2012 $62.25
Expense reduction and productivity enhancements have offset challenges to top line growth in recent quarters. Going forward, WN has about $2 billion in cash with which to exploit opportunities and invest in product improvements. The bakery business is well managed and efficiently run. WN’s share price should also reflect upside from Loblaws as operational efficiency improves from recent capital expenditures.