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Christine Poole's top picks: Royal Bank, Fluor Corporation, Cineplex

Tags: Market Call
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Christine Poole, CEO and Managing Director, GlobeInvest Capital Management

FOCUS: North American Large Caps

Market Outlook:

The slow upward grind in equity markets will persist supported by positive earnings revisions, ongoing corporate profit growth, signs of improving global economic momentum, accommodative monetary policy by central banks and a resurgence in global merger & acquisitions (M&A) activity. The recent rally in U.S. Treasuries was largely unexpected, possibly triggered by lowered expectations of U.S. economic growth and inflation exacerbated by dovish comments from the Fed, as well as profit taking/portfolio re-balancing by pension and institutional funds to lock in healthy gains from equity markets.  Current bond yields are unsustainably low and are expected to gradually rise as economies improve and liquidity is withdrawn at a measured pace. Equities are expected to outperform all other asset classes.

TOP PICKS:

Royal Bank (RY.TO) - Recent purchase price $73.50 level in May 2014
Royal Bank’s leading domestic lending franchise, dominant capital markets position and growing wealth management business contribute to consistent financial results.  Dividends are expected to grow at a similar pace to earnings growth. Boasting an above average return on equity compared to its competitors, Royal Bank is reasonable valued and has undeservedly lagged its peers year-to-date.  The stock provides investors with a current dividend yield of 3.8 percent.

Fluor Corporation (FLR.N) - Recent purchase price $74.30 US level in May 2014
Flour is a professional services firm, providing engineering, procurement, construction and maintenance as well as project management services globally.  Its geographically diversified backlog consists of 32 percent in the U.S., 34 percent The Americas, 28 percent Europe, Africa & Middle East and 6 percent Asia Pacific.  In its most recent quarter, Flour reported a record $10.7 billion US in new awards, driven by the Oil & Gas segment, resulting in a strong backlog of $40.2 billion or book-to bill 2.0 times. Flour’s global expertise and strong balance sheet are competitive advantages when bidding for new business around the world.

Cineplex (CGX.TO) - Recent purchase price $40.80 level in May 2014
Cineplex is Canada’s dominate film exhibition operator with an estimated 76 percent of Canadian box office revenues.   Management continues to successfully maximize revenue per patron through increasing concession spending and premium priced formats, such as 3D films, IMAX screens and VIP auditoriums.  Alternative programming is also offered to help drive traffic into its theatres.  Cineplex recently increased its dividend and provides an attractive 3.7 percent yield.

Disclosure: Personal Family Portfolio/Fund
RY Y Y Y
FLR Y Y Y
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Past Picks: June 11, 2013

MacDonald Dettwiler (MDA TSX)

Then: $66.20 Now: $89.19 +34.73% TR: +36.86%

CGI Group (GIB.A TSX)

Then: $30.12 Now: $36.50 +21.18% TR: +21.18%

Mondelez International (MDLZ NASDAQ)

Then: $29.80 Now: $37.92 +27.25% TR: +29.42%

Total Return Average : +29.15%

Disclosure: Personal Family Portfolio/Fund
MDA Y Y Y
GIB.A Y Y Y
MDLZ Y Y Y
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