Michael Sprung’s Top Stock Picks on BNN Bloomberg Market Call, August 22, 2018

Outlook:

Market participants are becoming more cognizant of the possible negative economic outcomes surrounding many of the political and geopolitical issues facing the world today. As a result market volatility is increasing as speculators bounce between risk-on and risk-off stances. Investors’ concerns are very much centered around the ongoing international trade negotiations and the impact that they may have on future economic growth prospects.

The uncertainty regarding the positive and negative consequences of changes to trading patterns will cause investors to focus more on the fundamental drivers of the companies in which they invest in order to minimized downside risk. Investors should continue to seek well financed, well managed companies that are selling at attractive price levels.

Michael Sprung, BNN, bloomberg, Market Call - Top Picks

Michael Sprung on BNN Bloomberg’s Market Call

Top Picks:

Bank of Nova Scotia, BNS-T, Owned personally and by clients, Last purchase September 2016 $69.85
The Bank of Nova Scotia is the most international of the Canadian banks with branches in the Caribbean, Central and South America. Loan growth in the Latin American markets has been robust. While exposed to Mexico (6% of profits), the future of NAFTA could be of some concern but to date there has not been any apparent deterioration in credit quality. Given BNS’s geographic footprint, operations are in areas sensitive to commodity prices that have recently exhibited higher levels of volatility. The current yield of 4.2% is attractive as are the relative valuation parameters to its peers.

Canadian Natural Resources Ltd., CNQ-T, Owned personally and by clients, Last purchase August 2015 $25.54
Canadian Natural resources is one of Canada’s leading senior producers of oil and gas. CNQ is one of the best managed and best capitalized companies in the energy sector with a diversified base of long life assets. As such, CNQ has weathered the seismic swings in energy prices and has a strong balance sheet that enables management to take advantage of opportunities. The dividend yield is 2.7%.

George Weston Ltd., Owned by clients, Last purchase January 9, 2015 $96.88
Weston’s operates fresh and frozen bakery operations in the US and Canada and food distribution through Loblaws; Canada’s leading food retailer. Bakery volumes have been depressed as management is in the process of rationalizing product offerings and optimizing production processes. Weston’s ownership of Loblaws has been creeping up to the 50% level as share buybacks in the market have reduced the float. Weston has a strong balance sheet. The current dividend yield is 1.8%. From time to time, Weston has been known to pay a special dividend.

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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.

 

Michael Sprung Top Stock Picks Canada on BNN’s Market Call, June 7, 2017

Contrary to the negative views expressed by the media, US investors have continued to embrace the policies of the Trump administration as evidenced by the markets advance. This enthusiasm has been most evident in the larger capitalized companies that would stand to benefit the most from lesser regulation and lower taxes. The Canadian markets have been less robust despite some positive economic indications that the Canadian economy has exhibited some positive growth of late in GDP that has been greater than that of the US. A lot of the Canadian media has caused concerns over the housing situation in Vancouver and Toronto as well as speculating on the uncertainties in renegotiating the NAFTA agreement. The European economies have also exhibited some positive trends despite some political disruptions, as have a number of the Asian economies.

Michael Sprung, Top Picks, Scotiabank, Canadian Natural, Hudbay Minerals

Michael Sprung's Top Picks: Scotiabank, Canadian Natural, Hudbay Minerals

The markets have generally been in an uptrend since the financial crisis ten years ago. Valuations are stretched but positive earnings surprises have kept the trend intact for the time being. It has been a slow, tepid cyclical recovery that is often typical following a financial crisis. A wane in investors' confidence over the Trump administration's ability to deliver its agenda could have a negative impact on current valuations.

Politics and economic cycles are often out of sync. The politics of populism are not as accommodating to the concepts of free trade and globalization that have sown the seeds of the current recovery, yet those very politicians may point to the recovery and take credit where none is due. In fact, they may sow the seeds of the next downturn. However, economic forces tend to prevail over the longer term and investors should be prepared to take advantage of dislocations in the interim.


Top Stock Picks Canada.


Bank of Nova Scotia, BNS-T, Owned personally and by clients. Last purchase Sept. 16, 2016 $69.85

The Bank of Nova Scotia is the most international of the Canadian banks with branches in the Caribbean, Central and South America. In the most recent quarter, record Global Banking and Capital Markets earnings reflected the benefits of management's investments in operational efficiencies and technology over the last few years. BNS has one of the strongest capital bases of the large banks. The stock currently yields 4.0%.

Canadian Natural Resources Ltd., CNQ-T, Owned by clients, Last   Purchase August 26,2015 $25.54

Canadian Natural resources is one of Canada's leading senior producers of oil and gas. CNQ is one of the best managed and best capitalized companies in the energy sector. As such, CNQ has weathered the seismic swings in energy prices and has been in a position to take advantage of opportunities. The recent purchase of a large working interest in the Athabasca Oil Sands Project will decrease the overall production decline rate and add to earnings. The dividend yield is 2.8%.

HudBay Minerals Inc., HBM-T, Owned personally and by clients, Last purchase April 7, 2016 $4.24

HudBay Minerals is one of Canada's leading producers of zinc, copper and precious metals with operations in Canada, Peru and the US. Constancia has made progress addressing some equipment issues. The expected ramp up of base metal production at Lalor with a mine plan for the gold zone resources and permitting later in the year for Rosemont will provide positive catalysts going forward.

You can view this and Michael's past appearences on Market Call here>>

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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 clients gain from our focus on the long-term fundamentals and not chasing short-term trends. 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.  

Canadian Natural Resources Limited (TSE:CNQ) reports strong growth in Q4 profit

Crude oil and natural gas producer Canadian Natural Resources Limited (TSE:CNQ, Mkt cap 47.84B, Div/yield 0.28/2.64, EPS -0.19, Shares 1.11B) has reported encouraging results for the final quarter of 2016, with net earnings rising to $566m compared with $131m a year earlier.

Net income per share was 51 cents, up from 12 cents per share in the fourth quarter of 2015.

For the full year, the company made a net loss of $204m, a considerable improvement from the previous year's net loss of $637m.

Canadian Natural Resources TSE:CNQ strong growth Q4 profitCanadian Natural also announced an increase in its quarterly dividend from 25 cents to 27.5 cents per share, which is payable on April 1.

Steve Laut, president of Canadian Natural, said in a statement: "2016 was a milestone year for Canadian Natural with the continued transition to a long life low-decline asset base with the strong execution and operational results of Horizon Phase 2B. In the fourth quarter of 2016 the company achieved record SCO production of 178,000 bbl/d and record low operating costs of $22.53 were realized as cost efficiencies continue to be a focus.

"Production levels at Horizon continue to be in excess of our 182,000 bbl/d nameplate capacity with December, January and February production averaging approximately 184,000 bbl/d, 195,000 bbl/d and 202,600 bbl/d respectively. Strong production combined with record low operating costs is delivering substantial cash flow generation and as a result our balance sheet is strengthening quickly. This will allow for greater returns to shareholders, as demonstrated by today's 10% dividend increase, economic development of our asset base and potential for opportunistic acquisitions."

In the coming year, Canadian Natural is looking to deliver 6% production growth with a $3.9bn capital program, Laut said.

"With approximately $1.05bn of Horizon Phase 3 expansion capital remaining to be spent in 2017 as a part of this capital program, an additional 80,000 bbl/d of SCO will be added at Horizon," he explained.

Phase 3 of the Horizon oil sands project is expected to start operating in the fourth quarter of 2017.

Canadian Natural Resources Limited (TSE:CNQ) is an independent crude oil and natural gas exploration, development and production company. The Company is engaged in the acquisition, exploration, development, production, marketing and sale of crude oil, natural gas and natural gas liquids (NGLs). Its exploration and production operations are focused in North America, largely in Western Canada; the United Kingdom (UK) portion of the North Sea and Cote d'Ivoire, Gabon, and South Africa in Offshore Africa. The Horizon Oil Sands Mining and Upgrading segment (Horizon) produces synthetic crude oil through bitumen mining and upgrading operations. Within Western Canada, the Company maintains certain midstream activities that include pipeline operations, an electricity co-generation system and an investment in the North West Redwater Partnership (Redwater Partnership), a general partnership formed in the Province of Alberta. More from Reuters »

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.  

TSE-CNQ – Acquisitions make Canadian Natural Resources Canada’s top natural gas producer

Canadian Natural Resources Limited (TSE-CNQ, Mkt cap 45.18B, P/E – , Div/yield 0.23/2.23, EPS -0.45, Shares 1.10B) has become the largest natural gas producer in Canada following its acquisition of about 12,000 natural gas wells in Alberta over the last two years, Reuters reported on Monday.

According to the news agency’s analysis of regulatory data, the counter-cyclical purchases have allowed CNRL to expand its business while rival operators sold assets or maintained a steady well count.

Thanks to the recently acquired wells, the company’s North American natural gas production increased by 9% in 2015, following a 35% rise the prior year. The expanded well count also gives the company a strategic advantage that will pay off in future years if the natural gas market improves, Reuters pointed out.

TSE-CNQ - Acquisition Canadian Natural Resources Canada top natural gas producer

TSE-CNQ – Acquisitions make Canadian Natural Resources Canada’s top natural gas producer

“All these new wells have low production, but they were bought for pennies for the dollar,” commented Chris Cox, analyst with financial services firm Ramond James. He went on to note that the wells are located in adjacent properties, offering cost synergies, and “if you are expecting pricing to improve then you get an additional uplift.”

CNRL president Steve Laut told Reuters that the company had pursued a strategy of purchasing wells across Alberta and British Columbia as they came up for sale in areas where it already operates.

“Western Canada over time has become a very high cost basin and so it’s difficult to compete especially when commodity prices go down,” Laut explained. “All industry … have to find ways to become more effective and more efficient.”

CNRL had an ownership stake in 27,968 producing natural gas wells in Alberta at the end of 2015, up 27% from a year earlier. In 2014 its well count increased by 69%. These gains resulted from acquisitions, not exploration, Reuters found.

Data filed with the Alberta Energy Regulator shows that in the 12 months from June 2015 to May 2016, CNRL became the license holder for about 3,960 producing natural gas wells. In the previous 12 months it took over around 8,290 wells — compared to only about 620 wells between June 2013 and May 2014.

In total, CNRL had a stake in 53,868 oil or gas wells in Alberta at the end of 2015, a 60% increase from two years earlier.

Canadian Natural Resources Limited is an independent crude oil and natural gas exploration, development and production company. The Company is engaged in the acquisition, exploration, development, production, marketing and sale of crude oil, natural gas and natural gas liquids (NGLs). Its exploration and production operations are focused in North America, largely in Western Canada; the United Kingdom (UK) portion of the North Sea and Cote d’Ivoire, Gabon, and South Africa in Offshore Africa. The Horizon Oil Sands Mining and Upgrading segment (Horizon) produces synthetic crude oil through bitumen mining and upgrading operations. Within Western Canada, the Company maintains certain midstream activities that include pipeline operations, an electricity co-generation system and an investment in the North West Redwater Partnership (Redwater Partnership), a general partnership formed in the Province of Alberta. More from Reuters » 

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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 clients are more concerned about losing money than making speculative gains. 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.

BNN Market Call Interview: Market Outlook and Top Picks

Market Call Outlook

Investors’ concerns have been evident as the volatility of the global markets has increased over the recent past. Those concerns have been exacerbated by intense coverage by the media of the many global calamities that are ongoing. New shocks to the market have appeared as investors’ attention is shifted between the ongoing debt problems in the European Union, mass emigration from unstable regimes in the Middle East across the Mediterranean, the sudden decline in the Chinese market with implications of a slowing domestic economy, ongoing fears of Russian hegemony in the Ukraine, territorial conflicts in the South China Sea, etc. Nearer to home, the Canadian economy continues to adjust to the impact of fallen commodity prices, particularly energy, and the subsequent ripple effects throughout the economy. Investors have also been captivated by trepidation and uncertainty as to the effect that a raise in interest rates may have on the currently more robust US economy, when and if such a rate hike occurs.

Given that until recently, the markets have exhibited little sign a correction since the financial crisis of 2008, we believe that the current volatility is a natural outcome of wavering economic conditions in conjunction with the unsettling geopolitical issues. Arguably, valuations had become a little rich and we are now going through an adjustment that is a natural phenominom of market cycles. These adjustments are rarely smooth or quick.

It is during these periods that investors should be seeking opportunities in companies that ultimately benefit from the calamity caused by current conditions and in fact prosper from their ability to take advantage of their weakened competitors.

Michael Sprung Interviewed by Mark Bunting on BNN

Market Call Top Picks

Bank of Nova Scotia

The Bank of Nova Scotia (TSE:BNS, Mkt cap 71.13B, P/E 11.07, Div/yield 0.70/4.75, EPS 5.32, Shares1.21B) is the most international of the Canadian banks with branches in the Caribbean, Central and South America. The Canadian banks have been impacted by the recent volatility in the markets. BNS is now selling at levels that long term investors should find attractive as the premium valuation has fallen. The dividend yield is now 4.7%.

Canadian Natural Resources

Canadian Natural Resources Limited (TSE:CNQ, Mkt cap 31.26B, P/E 19.85, Div/yield 0.23/3.22, EPS 1.44, Shares 1.09B) is one of Canada’s leading senior producers of oil and gas. In the current environment, investors should be positioning their exposure in the energy sector to the stronger, better managed firms that have the wherewithal to survive through the downturn and take advantage as weaker companies are forced to dispose of assets or sell at bargain prices. CNQ has an enviable balance sheet and extremely well regarded management. The recent falloff of the stock price presents a good place to establish an initial position in this company.

HudBay Minerals Inc.

HudBay Minerals Inc.(TSE:HBM, Mkt cap 1.49B, P/E 52.67, Div/yield 0.01/0.32, EPS 0.12, Shares 235.23M) 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 is currently ramping up production. HudBay has a number of projects coming on stream over the next few years, we anticipate that valuation levels will increase.

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 clients gain from our focus on the long-term fundamentals and not chasing short-term trends. 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, Jan. 7, 2015

Top Picks:

Manulife Financial Corp, Owned Personally and by Clients, Last Purchase December 18, 2014, $21.95

Manulife Financial Corp. (TSE:MFC, Mkt cap 40.04B, P/E 10.01, Div/yield 0.16/2.89, EPS 2.15, Shares 1.86B) is a leading Canadian-based financial services group with operations in Asia, Canada and the United States.  Over the past five years, the company has made tremendous strides in de-risking the balance sheet and improving profitability through increasing wealth management operations as well as redirecting the mix of products sold.  The insurance companies will be amongst the beneficiaries should interest rates start to rise.  MFC has one of the strongest capital bases in the industry.  The recent purchase of New York Life's Retirement Plan Services business while exchanging a part of a portfolio of John Hancock's  life insurance is positive and reinforces the shift into ongoing service areas.

michael sprung bnn market call
Canadian Natural Resources Limited, Owned by Clients, Last Purchase December 18 2014 $35.03

Canadian Natural Resources Limited (TSE:CNQ, Mkt cap 36.01B, P/E 11.53, Div/yield 0.22/2.73, EPS 2.86, Shares 1.09B) is one of Canada's leading senior producers of oil and gas.  In the current environment, investors should be positioning their exposure in the energy sector to the stronger, better managed firms that have the wherewithal to survive through the downturn and take advantage as weaker companies are forced to dispose of assets or sell at bargain prices.  CNQ has an enviable balance sheet and extremely well regarded management.  The recent falloff of the stock price presents a good place to establish an initial position in this company.


New Flyer Industries, Owned by Clients, Last Purchase December 18, 2014, $12.80

New Flyer Industries Inc (TSE:NFI, Mkt cap 729.35M, P/E 20.02, Div/yield 0.049/4.43, EPS 0.66, Shares 55.51B) manufactures and assembles transit buses in Canada and the US as well as providing after market services.  Third quarter results were effected by fewer deliveries as a result of delays in  inspections.  The company has been a consolidator in North America and is well positioned to participate in fleet renewals.  New Flyer will be a beneficiary of the improving economy in the US and the strong US dollar as about 80% of their revenues stem from the US

Outlook


Investors in Canada have been focused on the turbulence in the energy sector since November and continues in the new year.  Canadian markets are not alone in experiencing pressure in stocks and commodity prices while markets in the US have gone in the opposite direction as that economy continues to exhibit healthier expansion characteristics.  We anticipate that volatility will increase as the geopolitical and economic concerns in Europe and Asia continue to weigh on market sentiment.  In 2015, global trade and environmental negotiations will also factor into market sentiment.  This environment should provide value investors with good opportunities to identify reasonably priced securities and re-balance their portfolios to grow over the next business cycle.

You can view Mark Bunting's complete interview with Michael Sprung on BNN's Market Call 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.

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.

 

BNN Market Call – Michael Sprung Interviewed by Michael Hainsworth

Market Call – Michael Sprung Interviewed by Michael Hainsworth on BNN

Michael Hainsworth:  Hello! I am Michael Hainsworth. Welcome to the one hour edition of Market Call! We have got Michael Sprung here, President of Sprung Investment Management, taking your calls, emails, and tweets on Canadian stocks.

If you have got a question, we have got a line available for you right now. It’s 1-855-326-6266. You can email [email protected] or follow me on Twitter and send off a tweet.

Michael, welcome back to the program!

Michael Sprung Interviewed by Michael Hainsworth on BNN

Market Call – “Overall, I think we are seeing more optimism with respect to the outlook for consumer spending and so on going forward.”

Michael Sprung:        Well, it’s good to be here on a nice summer day.

Michael Hainsworth:  Yes, it’s been quite heated over the course of the last week, as have the markets. You tell your clients that we are in reactionary times. How do we play that?

Michael Sprung:        Well, I think one has got to be prepared to see a lot of volatility in the markets, and that’s been very, very evident over the last couple of months. Every time the Federal Reserve speaks we have a market reaction that seems to take things to an extreme.

So Mr. Bernanke hints at the possible end of QE. I mean, that could possibly have been good news. People could have said, gee, the economy is getting strong enough, maybe it could be self-sufficient from here. But instead, they said, well, maybe the recovery is not strong enough to carry on without all this stimulus and therefore we had to run out of the market, and then the next thing we know he would say, well, perhaps not just yet.

And then we have in Canada of course the Bank of Canada saying, we will be in a low interest rate environment as long as the economy looks like it is. It’s just limping along, and until we see more evidence of underpinnings in the recovery, it will likely remain so.

So I think to some extent people are depending too much upon sort of the short-term noise here. I mean, the fact is that what we are seeing is we are seeing a recovery in the U.S. or some evidence thereof. We are seeing gradual, but more employment. We are seeing a recovery in the housing sector, although nothing goes in a straight line. It can be somewhat spotty.

Overall, I think we are seeing more optimism with respect to the outlook for consumer spending and so on going forward.

So I think that although if you look at a global environment, our expectations for growth this year have been somewhat dampened, still overall we are looking for positive global GDP growth; Europe being the big exception. And in that environment I think people can take advantage of this sort of volatility and pick their spot.

So when you see markets come down very rapidly and a lot of the good stocks come down with the weaker ones, that’s the time that you should have some cash on the sidelines and be prepared to step in.

Michael Hainsworth:  So then we see market weakness, that gives you the opportunity to pick your spots as you point out, how do you go about choosing which spot is an appropriate one to pick?

Michael Sprung:        Well, since this could be a rather prolonged period here, I think that you have to be very, very choosy in terms of picking stocks that are, A, financially strong, that have the financial wherewithal to go through a relative weak period for demand, particularly in the commodity side.

I mean, we have seen materials this year, we have seen them hit particularly hard. We are seeing some recovery now in the energy stocks, but I suspect that as long as you pick those players that are likely to be the acquirers or the survivors, you will do quite well over the next business cycle.

Michael Hainsworth:  Well, let’s take a break and come back. I have got an email on the energy sector. We will take that one right at the start of the program.

Michael Sprung:        Sure!

Michael Hainsworth:  All right! We have got Michael Sprung here. He is the President of Sprung Investment Management. We are talking about Canadian stocks at 1-855-326-6266. We have got a line available for you right now.

Michael Sprung is here, President of Sprung Investment Management. We are talking about Canadian equities at 1-855-326-6266. [email protected] is an alternative way to get a hold of us. That’s what Brian did so today.

CNQ vs. BTE, he writes, “I am looking at investing in a Canadian oil exploration and development company. Do you think Baytex has better prospects for share appreciation over the short-term? Is it as safe a bet as CNQ for longer term appreciation excluding dividends?”

Michael Sprung:        Well, for longer term appreciation I would certainly look at CNQ, and I think even in the short-term, on a relative valuation basis, even though CNQ has had somewhat better performance over the last period than Baytex has, I would still lean towards CNQ.

You are looking at similar levels of profitability currently, but you are paying much less in terms of price to book. What you are paying for that profitability is less I think in CNQ than what you are paying in Baytex currently.

They are both very well-managed companies, but the other thing I would say is that CNQ, their payout ratio is a lot lower than what you see at Baytex. Baytex is one of the stocks that started out, as I recall, originally as an income trust, and they have carried on with a very high payout.

And hence, if you are buying it for yields, you would naturally be attracted to that, because I believe their yield is still in excess of or close to 5% or so, whereas it’s much less so in CNQ. But then again, Canadian Natural Resources actually earns their distribution and doesn’t depend on paying it out of just cash flow. So that’s a much longer term sustainable stock to own.

Michael Hainsworth:  I am seeing $40 targer prices over the course of the next 12 months. Do you see 13% upside from here?

Michael Sprung:        It could well be. I mean, a lot of this is going to be a function of the shorter term price of the commodities and so on. I do like Canadian Natural Resources. We don’t own it currently, but it’s certainly one that we would own at the right time.

Michael Hainsworth:  What is the right entry point if it isn’t 34 and change?

Michael Sprung:        Well, I mean that’s close to it, we just happen to be riding different horse at the moment.

Michael Hainsworth:  Jino, thanks for holding in North York. Welcome to the program! Hello!

Jino:                       Hello! Thank you for taking my call. My question is on H&R Real Estate. Despite all the REITs receiving everyday, it keeps on going down. Is this a good entry point? Thank you!

Michael Hainsworth:  Thank you!

Michael Sprung:        Well, of course in all of the REITs, they generally have done pretty well if you look over the last couple of years as people were sort of searching and searching for yield. And now that we have seen interest rates take a little bit different direction, we are seeing some pressure on the REITs. I think that that pressure could continue for a while.

To some extent I think perhaps the REITs as a group were taken to a position where on a valuation basis, given the interest rate environment we were in, was perhaps not so sustainable. So what could we see going forward, if interest rates are going up, then cap rates could go up, and if cap rates go up, which is the price basis on which REITs are valued in terms of the yield that they earn on their properties, then those prices could be driven down to some extent.

So I would step back and I think I would wait a little bit from here.

Michael Hainsworth:  All right! Jino, thank you for that from North York. Comox, BC.

Ron, good morning! Welcome to Market Call!

Ron:                       Good morning!

Michael Hainsworth:  Hello! Good morning! What’s your question?

Ron:                       Well, my question is whether the Royal Bank is going to do well over the next year?

Michael Hainsworth:  Where is the Royal Bank going over the next year?

Michael Sprung:        Well, I think that all of our banks are reasonably valued at this point in time, although we saw a couple of them hitting highs in the last week. A few have been lagging that run up recently and the Royal is not one of them. So on a relative valuation basis I think I would be looking at one or two of the other banks, so we might get there later in the show.

However, the Royal Bank today, you are getting yield that’s approaching 4%, not quite 4%, and on a multiple basis I think they have recaptured some of that discount that they were suffering from a few years ago.

Now, we do have exposure to the Royal Bank. We are holding onto it, but I don’t think that I would be adding to our position today, at today’s price.

Michael Hainsworth:  So Ron, stay with us, because at the end of the program we do have a bank opportunity for you as a top pick.

We are taking a quick break. Michael Sprung is here, President of Sprung Investment Management. We are talking Canadian equities at 1-855-326-6226.

View the rest of Michael’s interview here>>