Bruce Tatters, Founding Partner & CIO, Triumph Asset Management

FOCUS: North American Large Caps

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MARKET OUTLOOK:

North American markets will be strongly affected by both Federal Reserve policy action and U.S. Elections. We remain constructive on markets and believe that the recent improvements in commodities markets are a positive sign. Weakness in corporate earnings troughed in Q2 and will rebound throughout the balance of 2016 and into 2017. Look for cyclical stocks, both industrial and commodity, to continue to outperform. Global growth expectations will recover into the second half of 2016 with the recovery in commodities and continued global central bank policy stimulus. Canadian growth should also recover as commodity price recover and in particular oil prices.

 

Top Picks:

Allergan PLC (AGN.N)

Brent Saunders manages one of the premier growth platform specialty pharmaceutical. Companies focusing in the area of Facial Aesthetics. The company has a history of value creating transactions (acquisitions and divestitures) spanning the last several years.  It recently closed its divestiture of its generics business to Teva Pharmaceuticals for nearly US$40 billion. The company is in extremely strong position to deploy capital into a very weak pharmaceutical capital market. The company is trading at 14.9x 2017EPS prior to any capital deployment initiatives which is a large discount to the markets 20x valuation.

Suncor Energy (SU.TO)

We believe oil prices have bottomed and have begun a slow process of normalizing around the $60-$70bbl. Range. Suncor went into the significant downturn in energy prices in a strong balance sheet position and was able to take advantage of the low prices through the Syncrude interest acquisitions. The strong companies who make counter cyclical acquisitions create tremendous value for shareholders on subsequent commodity upswings. Suncor’s strong emphasis on operations excellence and cost reductions during the downturn will power cash flows as oil prices recover. Most recently, the stock has been held back by the wild fire situation in Alberta which has affected its operations. We expect the stock to recover as operations return to normal over the balance of the year. We have an intrinsic value of $50/share which is nearly 40 per cent higher than where the stock currently trades.

XPO Logistics (XPO.N)

Top 10 Global logistics company with tremendous leverage to the growth in global freight traffic (ie: e-commerce and other trends). The company completed a string of acquisitions in 2015 is concentrating on integration, cost cutting, and driving synergies across its business. As we move into 2017, we expect a global improvement in freight traffic which will accelerate the company’s already strong growth. CP is currently trading at 18.8x 2017EPS with a growth rate of earnings > 70 per cent over 2016. Our 12 month target on XPO is $50 or a return of 40 per cent.

Disclosure Personal Family Portfolio/Fund
AGN.N N N Y
SU.TO N N Y
XPO.N N N Y

 


Past Picks:  September 22, 2015

Apple (AAPL.O)

  • Then: $113.40
  • Now: $109.22
  • Return: -3.69%
  • TR: -1.63%

Skyworks Solutions (SWKS.O)

  • Then: $86.70
  • Now: $70.19
  • Return: -19.04%
  • TR: -17.72%

Allergan (AGN.N)

  • Then: $287.76
  • Now: $253.30
  • Return: -11.98%
  • TR: -11.98%

Total Return Average: -10.44%

Disclosure Personal Family Portfolio/Fund
AAPL.O N N Y
SWKS.O N N Y
AGN.N N N Y

 

Past Pick Updates

  • Increased weight in Home Depot late in 2nd quarter 2016 following a pullback in stock

 

Website: www.triumphasset.com