Top Stock Picks
Michael Sprung‘s top stock picks for July 2012
Precision Drilling (PD): Owned by clients, last purchase June 15 2012, $7.64
The pullback in oil prices has resulted in many companies in the oil patch to scale back capital expenditures. Investors are concerned that this trend may continue in firms that are dependent on greater cash flow. This fear has been particularly reflected in the oil service companies and PD is no exception. Selling below book value, PD offers tremendous value for patient investors.
Barrick Resources (ABX): Owned by clients, Last purchase June 15, 2012, $39.39
Disappointment at the board level with the share price performance has caused the board to replace the CEO with Jamie Sokalasky, a long term Barrick employee. In addition, the retreat in the price of gold has been reflected in the price of the producers’ stocks; Barrick being no exception. Barrick is the largest gold producer and is selling at reasonable multiples. We anticipate that the recent changes will result in a renewed focus on shareholder returns
Progressive Waste Solutions (BIN): Owned by clients, Last purchase July 15, 2012, $18.42
Recent weaknesses in the North East division have overshadowed more stable results in the Canadian operations. The stock price has over reacted to these problems and fears that competitive pricing pressures will continue to impact results for some time. BIN is well positioned to benefit from a pickup in economic activity. The company is well managed and will further expand operations strategically. At current levels, the stock price is compelling.
Why does our value investing approach work? The prices of well-established, high-quality stocks tend to rise over time as the companies create value for shareholders. Stocks touted by brokers and the media often rise to extreme highs in expectation that they will meet or exceed their short-term earnings forecasts. However, they can decline dramatically when they fail to meet those forecasts.