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.

 

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>>

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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.  

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>>

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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.

 

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.

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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>>

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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 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.
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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 – Royal Bank of Canada – Strategic Refocus Will Mean Job Losses

Stockwatch – Royal Bank of Canada says cuts will see its wealth-management arm shed its Caribbean business.

Stockwatch – Royal Bank of Canada (TSE:RY, Mkt cap 119.29B, P/E 14.21, Div/yield 0.75/3.63, EPS 5.82, Shares 1.44B) has announced it will be cutting jobs as it goes about refocusing its wealth-management division, although it wouldn’t be drawn on the number of people who will lose their jobs.

Stockwatch Royal Bank Canada cuts wealth-management shed Caribbean business

Stockwatch – Royal Bank of Canada says cuts will see its wealth-management arm shed its Caribbean business.

The Globe and Mail reports that the Toronto-based financial institution says the cuts follow a strategic review of its wealth-management arm, which will see it shed the division’s Caribbean business.

Analysts claim the changes will have a knock-on effect on some private banking groups in Canada and the United States that have an international focus.

RBC is not alone in its struggles in the Caribbean, with a number of Canadian banks experiencing an uphill battle with their divisions in the region.

Three Canadian lenders with substantial operations in the Caribbean, Royal Bank of Canada, Canadian Imperial Bank of Commerce and Bank of Nova Scotia, have all recorded write-downs from their units in the region in the last 12 months.

RBC, however, moved to temper any suggestions that there will be significant job losses as a result of the Caribbean wrap-up.

“Our long-term vision is a scalable and more focused wealth management business serving high net worth and ultra-high net worth clients from our key operational hubs in Canada, the U.S., the British Isles and Asia,” the bank said.

RBC’s move to exit the client-wealth-management business in the Caribbean comes hot on the heels of a deal to sell its Jamaican banking operations to Sagicor Group Jamaica.

Upon signing that agreement, RBC claimed it would continue to invest in the Caribbean but would focus on regions there where it has a bigger market share.

Stockwatch – Royal Bank of Canada’s net income grew by 5.21%, year over year, to $1.59 per share during the most recent quarter.

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.

Is Your Stock Broker Acting in Your Best Interest? Read more 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.

 

Stockwatch – Royal Bank of Canada Ordered To Pay $75.7 Million Following Merger Deal

Stockwatch – Royal Bank of Canada (TSE:RY, Mkt cap 113.79B, P/E 13.55, Div/yield 0.75/3.80, EPS 5.82, Shares 1.44B) has been ordered to pay $75.8 million in damages to former shareholders of Rural/Metro after a Delaware judge ruled that the bank failed to disclose conflicts of interest during the company’s $438 million buyout by Warburg Pincus LLC.

Stockwatch Royal Bank net income grew 5.21%, year over year $2.4 billion $1.62 per share

Stockwatch – Royal Bank’s net income grew by 5.21%, year over year, to $2.4 billion, or $1.62 per share

Delaware Chancery Court Judge J. Travis Laster outlined the share price discrepancies in a 95-page document, which showed how the value of Rural/Metro shares was $21.42 at the time of the sale, above the $17.25 per share paid by private equity firm Warburg Pincus – a difference of $4.17 per share.

Laster adjusted the damages figure by 17% after taking into account settlements worth $11.6 million that shareholders had reached with directors and Moelis & Co., which advised the company on its sale.

Kevin Foster, an RBC spokesman, said: “We are reviewing the decision and are considering our options. The process is ongoing so we cannot comment further.”

In March, Laster found that bankers at RBC Capital Markets were so eager to collect higher fees that they misled the ambulance-operator’s shareholders about its value to initiate a speedy sale. Laster clarified in his decision that “RBC did not engage in criminal” conduct.

The former shareholders had sought approximately $172 million from Toronto-based RBC, according to published reports. However, shareholder attorney Randall Baron said he was content with the judge’s decision.

Reuters highlighted that the ruling is the latest in a series of cases involving Wall Street bankers who have been hit with judgments or had to pay millions of dollars in settlements due to undisclosed conflicts in mergers and acquisitions.

Stockwatch – Royal Bank’s net income grew by 5.21%, year over year, to $2.4 billion, or $1.62 per share during the quarter ending July 31, 2014.

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

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Exchange Traded Funds Expose Investors to Unexpected Risks. Read more here>>

Investment Management – Risk vs. Return. Read more here>>

We believe that successful investors focus on the quality of the assets they buy. Speculators focus on guessing the future prices. 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.