Michael Sprung’s Top Stock Picks on BNN Bloomberg Market Call, July 16, 2018

Outlook:

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MARKET CALL: Michael Sprung’s Top Picks: July 16, 2018

Until recently, markets shrugged off political and geopolitical developments. However, investors were shaken in the latter part of the second quarter as tensions intensified regarding global trade in reaction to a series of tariffs and counter tariffs that were enacted. Global stock market volatility increased as investors exited positions in June and markets lost some of the gains that had been achieved earlier. It is becoming increasingly apparent that the US is no longer going to accept what it views as asymmetrical trade and military alliances as the status quo. This state of affairs has enormous implications for the US and its trading partners. Corporate profits would be severely impacted by a prolonged trade war.

In this environment, We would advise caution. Value rather than momentum will become more important in stock selection as investors seek to minimize risk on the downside. Investors should continue to seek well financed, well managed companies that are selling at attractive price levels.

Top Picks:

Manulife Financial Corporation, MFC-T, Owned personally and by clients, Last Purchase May 2, 2018 $23.47
Manulife is a leading Canadian-based financial services group with operations in Asia, Canada and the United States. The company is well positioned in Asia where they are experiencing high growth and profitability; 50% of Manulife’s core earnings stem from Asia. Under Roy Gori’s leadership, a new round of balance sheet optimization is underway emphasizing a more agressive approach to dealing with less profitable legacy businesses. Manulife has been lagging its peers recently, likely a result of some anticipated charges during this restructuring period. However, we anticipate that Manulife will benefit from rising rates, a flattening of the yeild curve and stronger results from Asia and Wealth Management. A renewed emphasis of cost efficiencies will improve margins over the next few years. The current yield of 3.7% is attractive.

ARC Resouces Ltd., ARX-T, owned by clients, Last Purchase March 9, 2016 $18.72
ARC in one of Canada’s leading conventional oil and gas companies with operations in Western Canada. Management is focused on the development of ARC’s high-quality long-life assets. Liquids rich opportunities in the Montney offer the prospect of higher margins. The expansion at Dawson Phase III was completed in mid-2017. Future growth in production will arise from completion of projects in Sunrise (mid-2019) and Dawson Phase IV in 2020. Arc has one of the strongest balance sheets amonst its peers with net debt to cash flow below 1.5X. The stock currently yields 4.1%.

Fortis Inc., FTS-T, Owned by clients, Last Purchase May 2, 2018 $42.45
Fortis is the largest investor owned gas and electric distribution utility in Canada with operations in the US and Belize. Over the next few years, Fortis is expected to significantly increase its rate base. Over the next five years, management anticipates capital expenditures in the order of $12.9 billion. The company is extremely well diversified by asset type, geographic location and regulatory regimes. Going forward, management’s focus is anticipated to be more on organic growth within its exisiting markets as opposed to M&A. Fortis has a history of dividend increases that are expected to continue. The stock currently yields 4.0%.

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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.

 

TSX Stock Picks & Outlook – Michael Sprung on BNN Market Call Tonight

TSX Stock Picks

Manulife Financial Corp, MFC-T, Owned personally and by clients, Last Purchase March 3, 2016, $18.50

Manulife 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. Manulife's geographic diversification in an era of expected interest rate increases, positions the company to do well and raises the prospect of future dividend increases. The stock currently yields around 3.0%.

TSX Stock Picks Outlook - Michael Sprung on BNN Market Call Tonight

TSX Stock Picks & Outlook – Michael Sprung on BNN Market Call Tonight

AGT Food and Ingredients Inc., AGT-T, Owned personally and by clients, Last Purchase December 18, 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.  2016 was demonstrative of the growing global demand for pulses. In 2017, AGT will be in a position to expand its ingredients and food shipments as additional capacity comes on-stream and the recently expanded pasta business in Turkey develops. 

Fortis Inc., FTS-T, Owned by clients, Last Purchase April 12, 2016, $39.41

Fortis is the largest investor owned gas and electric distribution utility in Canada with operations in the US and Belize.  Over the next few years, Fortis is expected to significantly increase its rate base. Over the next five years, management anticipates capital expenditures in the order of $12.9 billion. The company is extremely well diversified by asset type, geographic location and regulatory regimes. Fortis has a history of dividend increases that are expected to continue. The stock currently yields 3.9%.

Outlook:

2016 was a year full of surprises. Following a terrible start in early January to mid-February, markets recovered. Several major events failed to go the way of "expert" prediction; most notably the vote in the UK to leave the European Union (Brexit) and the election of Donald Trump as the 45th President of the United States of America. In both of these occasions, initially markets reacted as the experts predicted but then they changed course and rallied in very short order.While all of this was happening, the European migrant crisis persisted, spurring more radical political movements. The underlying financial problems within the European Union linger, inflaming the rhetoric of politicians competing for headlines. A disturbing trend from investors' point of view is the rising sentiment against free-trade and globilization.

There is no shortage of other global geopolitical concerns in the Middle East (particularly Syria), the South China Sea, Russian interventions in the Ukraine and Syria, etc. 

As we start 2017, we will carry all of this baggage forward. Already, new shocks have emanated from the first weeks of the Trump presidency and many more, yet unknown surprises are sure to follow. The US economy continues to expand and interest rate increases are anticipated as a result. Technology continues to influence productivity and labour markets. 

There will be winners and losers in this trend, but change is inevitable. 2016 is still fresh in our minds. 2017 will bring its own shocks and surprises. Investors will prosper if they stay fast with their discipline and do not get distracted by the turbulence that surrounds them. 

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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.  

Fortis (NYSE:FTS) completes its biggest acquisition to date

Electric and gas utility holding company Fortis Inc (NYSE:FTS, TSE:FTS, Mkt cap 17.01B, P/E 19.28, Div/yield 0.40/3.76, EPS 1.94, Shares 399.83M) has completed its acquisition of electric transmission company ITC Holdings Corp. for approximately US$11.3bn.

Fortis Inc TSE:FTS ITC Missouri

Fortis (NYSE:FTS) completes its biggest acquisition to date

Fortis is now among the top 15 North American regulated investor-owned utilities ranked by enterprise value, with an estimated enterprise value of C$42bn (US$30bn). Its utility operations serve customers in five Canadian provinces, nine U.S. states and three Caribbean countries.

“Our teams have worked tirelessly over the past year to make this acquisition happen, and we couldn’t be more pleased to welcome ITC to the Fortis group of utilities,” commented Barry Perry, president and CEO of Fortis. “The ITC acquisition is the largest in the history of Fortis, dramatically increasing our North American footprint. It establishes significant scale and a new platform in the electric transmission sector.”

The acquisition was completed after approval by the Kansas Corporation Commission — the final regulatory authorization required.

Fortis also announced last week its listing on the New York Stock Exchange in conjunction with the closing of the ITC deal. Following the merger with ITC, approximately 60% of the company’s assets are located in the United States.

Fortis received approval to list on the NYSE on May 6, 2016. Its shares commenced trading on the NYSE on October 14, 2016 under the ticker symbol ‘FTS’.

The company will retain its listing on the Toronto Stock Exchange under the same symbol.

As inter-listed shares, each Fortis common share can be traded on the Toronto Stock Exchange in Canadian dollars or on the New York Stock Exchange in U.S. dollars.

Fortis Inc (NYSE:FTS) is a St Johns NL based electric and gas utility company. The Company’s segments include Regulated Utilities and Non-Regulated Utilities. The Regulated Utilities segment includes Regulated Electric & Gas Utilities-United States, which consists of UNS Energy Corporation (UNS Energy) and Central Hudson Gas & Electric Corporation (Central Hudson); Regulated Gas Utility-Canadian, which consists of FortisBC Energy Inc. (FortisBC Energy); Regulated Electric Utilities-Canadian, which consists of FortisAlberta Inc. (FortisAlberta), FortisBC Electric and Eastern Canadian, and Regulated Electric Utilities-Caribbean, which includes its ownership interest in Caribbean Utilities Company, Ltd. (Caribbean Utilities), Fortis Turks and Caicos, and its investment in Belize Electricity Limited (Belize Electricity). The Non-Regulated Utilities segment consists of Fortis Generation and Aitken Creek Gas Storage LLC, a provider of natural gas transmission and storage services. More from Reuters » 

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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.

 

Fortis Inc (TSE:FTS) acquisition of ITC approved in Missouri

Electric and gas utility holding company Fortis Inc (TSE:FTS, Mkt cap 11.93B, P/E 21.47, Div/yield 0.38/3.60, EPS 1.94, Shares 284.47M) is a step closer to its planned acquisition of electric transmission company ITC Holdings Corp. after the deal was approved by the Missouri Public Service Commission (MPSC).

Fortis Inc TSE:FTS ITC Missouri

Fortis Inc (TSE:FTS) acquisition of ITC approved in Missouri

The two companies announced on Thursday that the MPSC had cleared the acquisition. It was approved by shareholders earlier this year.

Fortis first revealed in February 2016 that it had agreed to acquire ITC for US$11.3bn. ITC shareholders will receive approximately US$6.9bn in Fortis common shares and cash at closing and Fortis will assume approximately US$4.4bn of ITC debt.

When the acquisition is completed, ITC will become a subsidiary of Fortis and approximately 27% of its common shares will be held by ITC shareholders.

ITC owns and operates high-voltage transmission facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma, serving a combined peak load exceeding 26,000 megawatts along approximately 15,700 miles of transmission line.

Through this acquisition Fortis will become one of the top 15 North American public utilities ranked by enterprise value, with an estimated enterprise value of C$42bn (US$30bn).

“We are pleased to receive approval from the MPSC, and look forward to continuing to serve the transmission needs of the State of Missouri,” commented Barry Perry, president and CEO of Fortis. “The transaction continues to move forward on schedule and is expected to close by the end of the year.”

Closing of the acquisition is subject to receipt of certain other regulatory authorizations, including FERC and remaining state approvals.

Fortis Inc (TSE:FTS) is a St Johns NL based electric and gas utility company. The Company’s segments include Regulated Utilities and Non-Regulated Utilities. The Regulated Utilities segment includes Regulated Electric & Gas Utilities-United States, which consists of UNS Energy Corporation (UNS Energy) and Central Hudson Gas & Electric Corporation (Central Hudson); Regulated Gas Utility-Canadian, which consists of FortisBC Energy Inc. (FortisBC Energy); Regulated Electric Utilities-Canadian, which consists of FortisAlberta Inc. (FortisAlberta), FortisBC Electric and Eastern Canadian, and Regulated Electric Utilities-Caribbean, which includes its ownership interest in Caribbean Utilities Company, Ltd. (Caribbean Utilities), Fortis Turks and Caicos, and its investment in Belize Electricity Limited (Belize Electricity). The Non-Regulated Utilities segment consists of Fortis Generation and Aitken Creek Gas Storage LLC, a provider of natural gas transmission and storage services. 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 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.

 

Top Stock Picks — BNN Market Call

Top Stock Picks:

Bank of Nova Scotia, BNS-T, Owned by clients and personally, Last Purchase March 4 2016 $58.75

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, provisions for credit losses were up substantially, particularly with respect to the energy sector. Given BNS’s presence in markets with large commodity exposures, its premium valuation has fallen to a level investors should find more compelling. The dividend yield is now greater than 4.5%

Vermillion Energy Inc., VET-T, Owned by clients, Last Purchase March 24 2016 $43.31

Vermillion 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. Vermillion is well managed with a solid balance sheet. At today’s commodity prices, Vermillion generates free cash flow that supports the current yield of 6%. Its geographically diversified operations should contribute to a growing production profile over the next few years.

Fortis Inc., FTS-T, Owned by clients, Last Purchase March 24 2016 $40.08

Fortis is the largest investor owned gas and electric distribution utility in Canada with operations in the US and Belize. Over the next few years, Fortis is expected to significantly increase its rate base. Two years ago, Fortis completed a transformational acquisition of UNS in Arizona. This year, the Company is engaged in another major acquisition of ITC Holdings Corp., the largest independent fully-regulated electric transmission company in the US for $11.3 billion. This will be another transformational exercise that will enhance regulatory diversity and significantly increase the geographic footprint of operations and create opportunities to enhance shareholder value.

Michael Sprung BNN Market Call Interview Market Outlook Top Stock Picks

Michael Sprung BNN Market Call Interview: Outlook and Top Stock Picks

Outlook:

North American markets have continued to advance thus far in the year at an erratic and slow pace. It is as if investors are climbing an ever steeper wall of worry as the year advances despite some positive economic news. Housing and automobile sales have proved resilient as the employment picture in the US has improved. Yet, after significant recovery since the 2008 financial crisis, investors are focusing more and more on the potential negatives on the horizon. In particular, a great deal of concern has been centered on the Federal Reserve’s intentions to either raise interest rates or leave them at the current historically low levels. In this regard, the authorities face a conundrum. Raising rates would send a signal that the economy is strong enough to contemplate a normalization of the rate structure. On the other hand, the tepid pace of the recovery with the substantial increases in debt levels (largely enticed by low interest rates), combined with the very strong current value of the US dollar, creates the fear that any increase in rates could stall the economy.

In addition, a growing political backlash against globilization and free trade is evident in both Europe and the US. More immediate concerns are also growing over the implications of a possible Brexit (Britain leaving the European Union) that will be decided in a referendum in two weeks time. In Asia, massive debt levels within the shadow banking system in China are also making investors nervous. The fact that Japan deferred a sales tax increase also indicates that that economy continues to languish.

After a number of years of expansion fueled by debt, we could be entering a period of deleveraging that will stall global economic growth for a period and potentially caused markets to decline and volatility to increase. Investors should be prepared to take advantage in these circumstances to invest in well financed, well managed companies.

You can view Michael’s past interviews here>>

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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 – Fortis waves goodbye to its hotel business

Stockwatch – Fortis Inc. (TSE:FTS, Mkt cap 10.11B, P/E 25.33, Div/yield 0.34/3.78, EPS 1.42, Shares 278.62M) has come good on its promise to sell off its Properties division, announcing that it has signed a $365 million deal with a private investor group for the hotel assets of subsidiary Fortis Properties Corp.

Stockwatch Fortis goodbye hotel business

Stockwatch – Fortis waves goodbye to its hotel business

As the Telegram reports, the decision to part with its portfolio of hotel properties was taken in order to ensure focus on its core utilities business.

The St John’s-based firm says the deal with the unnamed private investor group will comprise all 22 hotels across seven Canadian provinces.

The announcement of the transaction, slated to close in the fall, comes shortly after the completion of the sale of Fortis Properties’ commercial real estate portfolio, reported to be worth $430 million.

At the start of the year, Nora Duke, president and CEO of Fortis Properties, outlined the sale of its Properties division, explaining that it only represented around 3% of the overall company.

In its latest statement, Fortis said the hotel transaction is further evidence of the company’s commitment to its North American electric and gas utility business.

“The disposition of these hotel and real estate assets is consistent with the corporation’s focus on its core utility business,” said Fortis president and CEO Barry Perry, in the statement.

“Post closing of the hotel transaction, virtually all of the corporation’s assets will be comprised of regulated utilities and long-term contracted energy infrastructure.”

The list of properties being sold includes the Delta, Holiday Inn and Sheraton hotels in St. John’s, the Mount Peyton Hotel in Grand-Falls Windsor and Greenwood Inn and Suites in Corner Brook.

Fortis Inc. is a Canadian electric and gas utility company based in St. John’s, Newfoundland. Fortis’ regulated utilities account for approximately 90% of total assets. The Company also holds non-regulated hydroelectric generation assets in Canada, Belize and New York. The Company also holds investments in non-regulated generation and non-utility assets.

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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.

 

Fortis To Shed Its Properties Arm

Fortis Inc (TSE:FTS, Mkt cap 10.74B, P/E 28.65, Div/yield 0.34/3.49, EPS 1.36, Shares 276.00M) has announced it is to sell off its properties division as it looks to shift focus towards its utility strategy in North America.

Fortis sell Properties ArmCBC News reports that the company, which owns 23 hotels in eight provinces, is getting out of the property business as an "exit strategy", and selling off all of its buildings.

Nora Duke, president and CEO of Fortis Properties, was quick to downplay the decision, stressing that it only represents around 3% of the overall company.

"It's really a question about strategy and strategic fit," she said, adding that Fortis is "principally a utility company", therefore the property business was always playing second fiddle to its overarching utility strategy.

"The properties company has been a successful business and really continues to be — it's a strong operating company, but really for Fortis, our parent company, it's really a question about fit and focusing on the utilities strategy," Duke explained.

Duke was non-committal on what she foresees for the various business entities operating at the properties – nor was she prepared to estimate how the decision will effect jobs.

She said that the outcome on those fronts depends on who buys the properties and what they envisage for the buildings.

However, Duke was keen to point out that the operating entities would still need to carry on and service customers and tenants, which she believes will guarantee the security of many of the jobs in the properties.

Duke revealed that there has already been some interest in a number of the properties, but she was not willing to divulge any further information on the initial discussions.

Fortis increased its quarterly dividend by 6.3%, to $0.34 a share from $0.32. The new annual rate of $1.36 yields 3.6%. Fortis has raised its payout every year for the past 42 years.

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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.

Stockwatch – Fortis Finalizes UNS Energy Acquisition

Stockwatch – All outstanding shares of Tucson-based firm UNS Energy Corporation have been successfully acquired by Canadian electric and gas distribution utility Fortis Inc (TSE:FTS, Mkt cap 7.17B, P/E 21.92, Div/yield 0.32/3.84, EPS 1.52, Shares 215.35M) the company has announced.

Stockwatch Fortis Finalizes UNS Energy Acquisition

Stockwatch – Fortis Finalizes UNS Energy Acquisition

The aggregate purchase price for the acquisition amounted to approximately US$4.5 billion – the estimated value of UNS Energy’s total assets by the end of June 2014. This includes the assumption of around US$2.0 billion of debt.

UNS Energy, a vertically integrated utility services holding with three subsidiaries, serves nearly 657,000 electricity and gas customers, primarily in its home state of Arizona. The company’s fiscal operating revenues for 2013 amounted to approximately US$1.5 billion.

Fortis has issued the final instalment notice, according to which payment of the final instalment is due by 27 October 2014, which is referred to as the final instalment date. The instalment is in the size of $667 per $1,000 principal amount of debentures.

With the acquisition, Fortis gains hold of UNS Energy subsidiaries Tucson Electric Power (TEP) and UniSource Energy Services (UES). The two subsidiaries will remain headquartered in Tucson, Fortis has stated. The company stated it foresees no changes in its existing operations.

Commenting on the acquisition, Stan Marshall, chief executive officer for Fortis, noted that UNS Energy is exactly the type of North American high-quality utility asset that Fortis seeks to acquire as part of its investment strategy. He believes the move will boost earnings and will help reduce business risk for the company, by improving the geographic diversification of its businesses.

The company’s president, Barry Perry, added that Fortis was glad to welcome UNS Energy’s employees into the organization. With their input, he says, Fortis will continue to satisfy the energy needs of its customers “safely, reliably and cost effectively.”

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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.