Michael Sprung’s Outlook and Top Picks on BNN Bloomberg’s Market Call, March 17, 2020

Outlook:

The past few weeks have not been kind to investors. Markets around the world have been ravaged as a result of the deteriorating economic conditions that have been exacerbated by the Covid-19 virus. We are now in a bear market. It is unclear as to the extent to which a recession may impede economic recovery.

michael sprung bnn bloomberg market call

The key is to stay focused on the longer term. Conditions will ultimately improve. Keep calm and carry on.

Under these conditions, it is important for investors to avoid the temptation to try to time the market. It is a time to seek investments in companies with strong financial conditions that can weather the storm of a prolonged recession and slow recovery if that is what occurs. In bear markets, prices fall rapidly and the securities of the financially stronger companies suffer with the weaker companies. The key is to stay focused on the longer term.

As Warren Buffett has stated: “The stock market is a device to transfer money from the impatient to the patient.” Conditions will ultimately improve.

Keep calm and carry on.

Top Picks:

Royal Bank, RY-T, Owned by clients, Last Purchase March 16,2020 at $84.45

The Royal Bank is Canada’s largest financial institution with a market capitalization around $130 billion. The scale of the bank is an advantage in mass-market banking. Management is intent on maintaining their lead and improving market share through investing heavily in technology and its distribution network. Investment is also being directed towards retail growth in the US. As these investments payoff, the bank should benefit from positive operating leverage leading to greater profitability and future dividend increases. The current yield of 5.1% is attractive and longer term capital appreciation will accrue to patient investors.

George Weston Limited, WN-T, Owned by clients, Last Purchase March 16, 2020 at $94.91

Weston’s operates fresh and frozen bakery operations in the US 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% level as share buybacks in the market have reduced the float. Weston has a strong balance sheet. The current dividend yield is 2.3%.

Fortis Inc., FTS-T, Owned by clients, Last Purchase March 16, 2020 at $48.85

Fortis is a North American regulated electric and gas utility operating in five Canadian provinces, nine US states and three Caribbean countries. Over the next few years, Fortis is expected to significantly increase its rate base. The Company is currently carrying out a capital expenditure program in the order of $18.9 billion that should sustain a 6% to 7% growth rate through 2024. 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 existing markets as opposed to M&A. Fortis has a history of dividend increases that are expected to continue. The stock currently yields 3.9%.

You can view the complete Market Call interview 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.

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.

Michael Sprung’s Outlook & Top Picks on BNN Bloomberg MarketCall, March 20, 2019

Outlook:

Markets have been surprisingly robust since the lows of late December despite signs that global economic growth has been moderating since 2017. While there have been some positive stimuli over the intervening period, the overall trend has been for successively lower estimates of GDP growth. The US markets have been buoyed by the tax reductions in 2018 that have contributed to strong earnings growth which have been used to finance share buybacks and dividend increases. Little has been spent comparatively on capital expenditures to support future operations. Wage gains and employment have also made some progress in the US. The Eurozone has been less buoyant as the Brexit fiasco continues to play out and trade wars take their toll. The German economy has slowed at a faster rate than pundits pontificated while Italy actually reported a technical recession. While the Chinese economy continues to grow at a faster pace than the other developed economies, the fact that growth has been slowing has large implications for its trading partners given the size of the economy. The ongoing trade fight with the US does not bode well for China’s economy particularly at a time when they are attempting to rein in excessive debt levels locally.

Markets have been surprisingly robust since the lows of late December despite signs that global economic growth has been moderating since 2017.

Against this backdrop, central banks have been attempting to tighten monetary supply which has precipitated fears that over tightening might choke what growth momentum is left. Given evidence that these fears may be well founded, many of the central banks have been expressing that some moderation in this tightening process may be needed to keep the economies from slipping into a recession.

It appears that there has been a disconnect between the stock markets and the direction of the global economy. As such, the markets are vunerable to an external or financial shock or an error in monetary policy by the central banks.

Investors are advised to invest cautiously in these conditions.

Top Picks:

Manulife Financial Corporation, MFC-T, Owned personally and by clients, Last Purchase May 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 continue to experience high growth and profitability; 50% of Manulife’s core earnings stem from Asia. Since Roy Gori has assumed the CEO’s chair, Manulife has begun to address some of the less profitable legacy issues. These steps will further solidify an already strong balance sheet as several billion dollars of capital will become avaiable. After a period of several years, the company is well positioned to continue periodic increases to the dividend. The valuation is attractive at just over book value with a current yield of 4.3%.

ARC Resources Limited, ARX-T, Owned by clients, Last Purchase March 2016, $18.69
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. Liquids now represent over 25% of production. Management has been adept at expense control and managing an effective hedging program. As production has grown, ARC is less sensitive to Western Canadian natural gas prices and management targets that by 2021 less than 40% of revenues will stem from Western Canada. The valuation is compelling at less than book value with a yield of 6.2% and a dividend well covered by cash flow. Arc has one of the strongest balance sheets amongst its peers.

George Weston Limited, WN-T, Owned by clients, Last Purchase, January 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. The company is emerging from a challenging year in 2018 as bakery operations underwent a strategic shift in product offerings and production optimization. During this period, sales from the bakery division were depressed. Loblaws is now over 50% owned by Weston as the result of share buybacks. The Company has a very strong balance sheet. Implicit in Weston’s valuation, the ownership of Loblaws represents some 54% with another 26% reflected by Choice Properties REIT. The current dividend yield is 2.2% but Weston has, in the past, been known to pay the occasional special dividend.

You can view the entire BNN interview 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.

 

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.

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 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.

 

Michael Sprung’s Top Stock Picks on BNN’s Market Call Tonight, December 13, 2017

Michael Sprung’s Outlook

As 2017 comes to a close global stock markets have continued their ascent throughout the fourth quarter of 2017. Many economists pontificate on the synchronized global recovery underway, evident from improving employment levels and some muted signals of inflationary growth. Commodities have been on a roller coaster as perceived demand has spiked up and retreated over the course of the quarter. Wage demands exhibit some signs of accelerating but remain largely tempered by companies shifting to larger expenditures on technology as a means of enhancing productivity. We have yet to see a significant correction in the markets as investors appear to be complacent or unaware of the rising valuation levels and the growing geopolitical tensions in the world.

Michael Sprung Top Picks BNN Market Call

Michael Sprung’s Top Picks BNN Market Call: December 13, 2017

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 remain centered around the NAFTA negotiations. Since the Brexit vote and the start of the Trump presidency, a backlash against global free trade has been growing, 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 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.

Michael Sprung’s Top Stock Picks

Alaris Royalty, AD-T, Owned personally and by clients, Last Purchase November 7, 2016, $19.84

Alaris Royaly invests in a diversified range of North American private companies with the objective to generate cash flows to support dividends to shareholders. Problems within a number of investee’s over the past year have hindered progress. Many of these concerns have largely been dealt with and now the company is poised to enter a renewed period of growth. Alaris is deploying capital in new partners and has made their largest investment to date in Sales Benchmark Index,LLC of US$85 million. AD is well positioned for modest capital deployment in 2018 that should result in cash flow growth and a lower payout ratio.

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 that zinc production in Manatoba will ramp up in 2018. Longer term the Rosemont copper mine in Arizona offers more growth. Hudbay has been improving the balance sheet paying down debt providing greater liquidity for future investment.

George Weston Limited, WN-T, Owned by clients, Last Purchase September 9, 2016, $74.59

Recent setbacks in frozen foods and the cautionary outlook in the grocery industry have resulted in an opportunity for longer term investors as the shares now trade at attractive valuation levels. We expect the incoming president, Richard Dufresne, will continue to focus on very tight expense control and operational efficiencies in Weston Foods and Loblaws. Weston’s ownership in Loblaws will surpass the 50% level in 2018.

You can view the complete 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>>

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.  

Canada Stockwatch – George Weston Reports Solid First-Quarter Revenue Rise

Canada Stockwatch – George Weston: acquisition of Shoppers Drug Mart key factor in raising the company’s first quarter revenue by 36.7%.

Canada Stockwatch – George Weston Limited (TSE:WN, Mkt cap 12.47B, P/E 156.67, Div/yield 0.42/1.71, EPS 0.63, Shares 127.92M) has cited the acquisition of Shoppers Drug Mart as a key contributing factor in raising the company’s first quarter revenue by 36.7% to $10.41 billion.

Canada Stockwatch George Weston acquisition Shoppers Drug Mart

Canada Stockwatch – George Weston: acquisition of Shoppers Drug Mart key factor in raising the company’s first quarter revenue by 36.7%.

As the Cape Boston Post reports, the Toronto-based firm saw its profit rise significantly in the first three months of 2015, with net income climbing 39.2% to $167 million or $1.23 per share.

Meanwhile, adjusted operating income jumped up 73.9% to $586 million, $541 million of which came from Loblaw.

Pavi Binning, the company’s president, was particularly pleased with the performance of Loblaw, but noted that the smaller Weston Foods bakery business also enjoyed a solid year, delivering “volume growth and higher sales across all business units.”

The Q1 report shows sales for the Weston Foods arm rose 12.2%. However, its adjusting operating income declined 13.5% year-on-year to $45 million.

Binning put the smaller profit margin down to higher input costs, new plant costs and investments in other improvements.

This time last year, George Weston reported $7.612 billion of revenue (mostly from Loblaw before its Shoppers addition), $337 million of adjusted operating income and $120 million or 86 cents per share of net income.

Weston said its dividend will rise 1.2% or half a cent to 42.5 cents per common share.

“George Weston Limited continues to focus on creating long term shareholder value and today, for the third consecutive year, we announced a dividend increase,” said W. Galen Weston, executive chairman, George Weston Limited.

“We continue to execute against the strategic initiatives set by each of the company’s operating segments to deliver stable, long term growth and profitability.”

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 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.

 

Stockwatch – Q3 Report Leaves George Weston Seeking Growth

Stockwatch – George Weston, the parent company of Loblaw was hit by costs related to the acquisition of Shoppers Drug Mart.

Stockwatch – George Weston Limited (TSE:WN, Mkt cap 12.71B, P/E 118.01, Div/yield 0.42/1.69, EPS 0.84, Shares 128.10M) has reported a drop in its third quarter earnings, prompting the food processing and distribution company to announce that it is working on a new strategic plan to improve its bakery division.

Stockwatch - George Weston reported drop third quarter earnings

Stockwatch – George Weston Limited reported a drop in its third quarter earnings.

The parent company of Loblaw was hit by costs related to the grocery giant’s acquisition of Shoppers Drug Mart, but remained optimistic there are areas of growth available to it in the bakery market.

George Weston said that it earned a profit from continuing operations attributable to shareholders of $53 million or 30 cents per share, compared with a profit from continuing operations of $168 million or $1.21 per share 12 months ago.

Last year, however, the company also earned $58 million from discontinued operations. Once a number of one-time items are taken out – including costs related to the acquisition of Shoppers and restructuring – adjusted earnings from continuing items increased by 24.2% to $1.59 per share from $1.28 per share a year ago.

The arrival of Shoppers Drug Mart to its roster encouraged a revenue boost to the tune of 34.7% to nearly $14 billion for the quarter compared with $10.4 billion a year ago.

Excluding the sales from Canada’s largest pharmacy chain, George Weston’s revenue rose more modestly by 2% to $10.59 billion from $10.38 billion, which is attributed primarily to its Loblaw division.

The results exceeded analysts’ estimates of $1.54 of adjusted earnings and about $14 billion of revenue for the quarter, according to Thomson Reuters.

W. Galen Weston, George Weston’s executive chairman, said he was content with the company’s performance after two full quarters of operations with Shoppers Drug Mart.

George Weston Ltd. continued to advance strategic initiatives and focus on long term value creation for shareholders,” he added.

Stockwatch – George Weston generated $734 million in cash flow in the third quarter. The company made $198 million in interest payments, and invested $342 million in capital expenditures. This left $194 million of free cash flow. Weston ended the quarter with $1.3 billion in cash and cash equivalents on its balance sheet.

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.

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.