Michael Sprung’s Top Picks – BNN Bloomberg Market Call, June 17, 2019

MARKET OUTLOOK

Global economic growth will continue to deteriorate over the remainder of 2019 as trade conflicts are having an effect on fundamental economic events. Evidence of the impact of the disruption caused by these trade concerns can be seen in the bond market where rates are reflecting higher expectations of a slowdown and in the increasing volatility in the equity markets. The diminished pace of global expansion is also evident in stagnant manufacturing output and slower trends in service delivery.

Michael Sprung Top Picks BNN Bloomberg Market Call

Michael Sprung’s Top Picks – BNN Bloomberg Market Call, June 17, 2019

In the U.S., the first quarter exhibited some respite from the market fallout of the fourth quarter of 2018. However, this was largely the result of inventory accumulation that overshadowed the slowdown in business investment and capital expenditures. Europe also continues to struggle with a weakening outlook for exports and capital investment as trade issues cloud the horizon for improvement and manufacturing is depressed. Brexit continues to confound the outlook for the U.K. as trade and business investment is concerned.

Overall, the advanced economies are getting by as labour markets are tight, inflation has been moderate and monetary policies have been very accommodative. With prospect of slower economic growth, central banks are likely to continue to restrain rates but there are limits to how long this can last in the face of ever increasing debt loads.

In this environment, investors are advised to be very cautious but remain cognizant to opportunities that will strengthen portfolio profiles.

TOP PICKS

SUN LIFE FINANCIAL, TSE: SLF

Last purchased in February 2016 at $37.20.

Sun Life Financial operates in Canada, the U.S., U.K. and Asia. SLF has a very strong balance sheet with industry leading excess capital of some $3 to $3.5 billion. We anticipate reasonable growth in earnings over the next few years that should result in expanding dividends. The stock currently yields 4.0 per cent and represents good defensive value in the current environment.

GEORGE WESTON LIMITED, TSE: WN

Last purchased in January 2015 at $96.88.

Weston’s operates fresh and frozen bakery operations in the U.S. and Canada and food distribution through Loblaws, Canada’s leading food retailer. Volumes in the bakery business have been depressed as management goes through the process of rationalizing product offerings to be more in line with consumer trends and optimizing production processes. Going forward, we anticipate that margins in the bakery business will improve as a result of these efforts. Weston’s ownership of Loblaws has been creeping up to the 50 per cent level as share buybacks in the market have reduced the float. Weston has a strong balance sheet. The current dividend yield is 2.1 per cent.

ENBRIDGE, TSE: ENB

Last purchased in June 2019 at $45.39.

Enbridge is a leading energy generation, distribution and transportation company in the U.S. and Canada. Its pipeline network includes the Canadian Mainline system, regional oil sands pipelines and natural gas pipelines. The company also owns and operates a regulated natural gas utility and Canada’s largest natural gas distribution company. Additionally, Enbridge generates renewable and alternative energy with 2,000 megawatts of capacity. Export pipe capacity is tight and ENB has the ability to supply some incremental relief through Mainline at modest capital cost. The company’s stepped up asset monetization program has reduced leverage ahead of schedule. ENB has a highly contracted cash flow profile, financial flexibility and a secured $22-billion growth program. At current prices, the stock yields 6.5 per cent. The stock has been under pressure due to recent challenges with respect to capacity expansions in the US providing a good entry point.

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 Bloomberg Market Call – Michael Sprung’s Top Picks and Outlook

Outlook:

market call, michael sprung, top picks

MARKET CALL: Michael Sprung’s Top Picks: May 30, 2018

Since the end of the first quarter, North American markets have trended up as the US economy has continued to exhibit positive momentum and the Canadian market has reflected strength in commodities, particularly energy related commodities until most recently. Volatility in the markets has been the result of continuing concerns regarding inflationary pressures and the potential negative impact that rising interest rates could have on the outlook for sustained economic expansion. Geopolitical tensions have also had an effect on investor confidence. Internationally, the discourse between the US and North Korea has been unsettling as well as some political chaos in Europe. From Canada’s perspective, the unsettled trade negotiations surrounding NAFTA combined with the dysfunctional political environment with respect to the Trans Mountain Pipeline are eroding investor confidence.

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 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:

Sun Life Financial Inc., SLF-T, Owned personally and by clients, Last Purchase February 2016 at $37.20
Sun Life Financial operates in Canada, the US, UK and Asia. Insurance companies will benefit from a rising interest rate environment. SLF has a very strong balance sheet with industry leading excess capital. We anticipate reasonable growth in earnings over the next few years that should result in expanding dividends. The stock currently yields 3.5% and represents good value in the current environment.

Precision Drilling Corp., PD-T, Owned by clients, Last Purchase September 2015 at $5.00
Precision Drilling is Canada’s leading contract drilling company. Over the last few years, PD has upgraded their rigs and offers leading technology with a push into analytical platforms offering greater efficiencies. Pricing in the US has improved. Management is very focused on capital discipline and debt repayment is a prioritsuy.

Hudbay Minerals Inc., HBM-T, Owned personally and by clients, Last purchase September 8, 2017, $9.41
Hudbay’s flagship copper mine Constancia is performing well and expectations are Pampacancha will start contributing in 2019. Growth in the next few years will stem from expanded copper, zinc and precious metal production. Recent updates at Lalor indicate greater gold production possibilities by Q3 2018. Rosemont permitting continues with construction anticipated 2019 to 2021. At current levels, HBM is selling at an attractive discount to its peers.

You can view the complete 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.

 

Top Picks & Outlook – Michael Sprung on BNN’s Market Call Tonight

Outlook:

Global stock markets generally continued their upward bias in  the third quarter of 2017. This bias was supported by strengthening economic growth in both the developed and emerging economies although at subpar levels compared with traditional recoveries. As central banks have cautiously raised interest rates, bond prices have come under pressure. Wage demands in the developed countries have not accelerated as inflationary expectations have remained low and productivity improvements have been driven by technology. In this environment, central banks may temper their enthusiasm to normalize interest rates and reduce their bloated balance sheets.

Michael Sprung Top Picks Sun Life Financial, SLF, Suncor, SU, Aecon Group, AR

Michael Sprung’s Top Picks: Sun Life Financial, SLF, Suncor, SU, Aecon Group, ARE

Against this backdrop, stock markets have continued to advance. The S&P 500 in the US has hit new highs surpassing levels from before the financial crisis. Valuations have also hit high levels making the search for new investment ideas challenging.

A number of factors could come into play that would precipitate a more meaningful market correction than we have seen in the last ten years. In Canada, concerns are centered around the NAFTA negotiations. Since the Brexit vote and the start of the Trump presidency, a backlash against global free trade has been evident, causing uncertainty in the business community, thus dampening the appetite for capital investment. Other geopolitical factors are also of concern. North Korea’s nuclear threat and heightened discord with the US has been very prominent in the headlines as have tensions in the Middle East, Venezuela, Spain, Russia and the Ukraine. Monetary concerns in Greece,Italy, Spain and Portugal have not gone away.

All of these factors lead us to exercise caution and prudence in our investment stance. Investors have to look hard to find well financed, well managed and reasonably priced companies.

Top Picks:

Sun Life Financial Inc., SLF-T, Owned personally and by clients, Last Purchase February 2016 at $37.20

Sun Life Financial operates in Canada, the US, UK and Asia. Insurance companies will benefit from a rising interest rate environment. We anticipate reasonable growth in earnings over the next few years that should result in expanding dividends. The stock currently yields 3.5% and represents good value in the current environment.

Suncor, SU-T, Owned by clients, Last Purchase March 2016 at $32.94

Suncor is Canada’s largest integrated oil and gas company. Suncor has a strong production base with quality long-term assets, a strong balance sheet, and an integrated business model that smooths to some extent the cash flow from the various business segments. Management has been focused on increasing efficiencies and positioning the company for future growth. Over the remainder of the year, Fort Hills and Hebron will be coming online. Suncor has a strong balance sheet to support and expand operations. At current levels, the stock yields 3.1%.

Aecon Group Inc., ARE-T, Owned by clients, Last Purchase March 2016 at $16.00

Founded in 1910, Aecon Group is one of Canada’s largest construction companies.   Aecon’s backlog in other infrastructure, transportation and nuclear projects has been growing. The more sophisticated projects should result in higher profitability. The environment for increased public spending in Canada is robust. The company has announced that is considering a possible sale that caused an initial bounce in the share price. Since then, the price has receded somewhat giving a current yield of 3.0%. If a sale occurs, we anticipate that it would happen at higher prices.

You can view the complete Market Call interview here>>

What is Successful Investing? Learn more 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.

 

Stockchase Top Picks – Michael Sprung on BNN Market Call

Stockchase Top Picks

Sun Life Financial Inc., SLF-T, Owned personally and by clients, Last Purchase February 2016 at $37.20

Sun Life Financial operates in Canada, the US, UK and Asia. Insurance companies will benefit from a rising interest rate environment. We anticipate reasonable growth in earnings over the next few years that should result in expanding dividends. At just under $50 the stock currently yields 3.4% and represents good value in the current environment.

stockchase top picks michael sprung bnn market call

Stockchase Top Picks – Michael Sprung on BNN Market Call

Precision Drilling Corp., PD-T, Owned by clients, Last Purchase September 2015 at $5.00

Precision Drilling is Canada's leading contract drilling company with growing operations in the Middle East. During the downturn in energy prices, management has upgraded assets and improved efficiency. Earnings and cash flow will be very reactive to an improved environment. Recent signs that conditions are improving come from longer contracts and rising day rates. 

George Weston Ltd., Owned by clients, Last Purchase January 2015 at $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. Recent capacity additions are complete and greater volumes should lead to better margins in the bakery business. Weston's ownership of Loblaws has been creeping up  as share buybacks in the market have reduced the float, Weston has a strong balance sheet. The current dividend yield is 1.6%. From time to time. Weston has been known to pay a special dividend.

Outlook:

The US market has continued to rise in the first two months of 2017 as investors anticipate a better business climate under the Trump administration and the Federal Reserve has indicated more confidence in the economic recovery through yet another interest rate hike. The Canadian market has been less directional as commodity prices have fluctuated and economic activity remains comparatively weak. Low interest rates have attracted Canadian consumers to increase debt loads to levels that would be difficult to sustain in a rising interest rate environment. There is no shortage of global geopolitical concerns in the Middle East (particularly Syria), the South China Sea, Russian interventions in the Ukraine and Syria, etc. The populist culture continues to threaten the status quo and more particularly free trade and globilization.

Over the past eight years, multiples have expanded driving valuations to higher levels. We would suggest that this is a time for caution and vigilance in terms of security selection.

What is Successful Investing? Learn more here>>

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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.