Oct 19, 2016
John Stephenson's Top Picks: October 19, 2016
BNN Bloomberg
John Stephenson, president and CEO of Stephenson & Company Capital Management
Focus: North American large caps and resource stocks
_______________________________________________________________
MARKET OUTLOOK
While we may be witnessing a stabilization of global economic growth, there is a dearth of evidence pointing to a meaningful acceleration. Given the weak economic growth globally, a broadening out of cyclical sector leadership is unlikely, suggesting that defensive sectors will once again return to a leadership role.
CATALYSTS TO WATCH
- U.S. election: Can Trump defy the odds? Markets currently are pricing a Clinton win — a resurgent Trump campaign could send the markets swooning.
- Earnings season: A lot of skepticism surrounding this earnings season — can it surprise to the upside?
- Fed open market committee policy meetings: Will they really go in December or will they still be on hold?
- U.S. dollar: Can the strengthening trend continue?
- Oil: With a breakout of over $50/bbl, can the trend continue?
TOP PICKS
PEMBINA PIPELINE CORP (PPL.TO) – Last bought on Sept. 28 at $ 39.89
- Strong fee-for-service business with cash flows from primarily liquids infrastructure, supports premium valuation.
- Solid yield of 4.6 per cent.
- Company has raised its dividend annually in the five per cent range.
- Strong pipeline of growth projects.
SHORT: SHAKE SHACK (SHAK.N) – Last shorted on Oct. 19 at $32.84
- Valuation is very stretched at 70x P/E.
- A widening gap between the cost of eating out versus eating at home.
- Weak consumer.
SHORT: GUESS? INC. (GES.N) – Last shorted on Oct. 19 at $13.91
- The brand has lost its strength as it becomes less relevant to younger generations.
- Guess' traditional strength lies in its denim offering, but competition in the jeans space has become fierce.
- Over the past three years, operating profit fell approximately 24 per cent annually on six per cent average revenue declines.
Disclosure | Personal | Family | Portfolio/Fund |
---|---|---|---|
PPL | Y | N | Y |
SHAK | N | N | Y |
GES | N | N | Y |
PAST PICKS: NOVEMBER 16, 2015
BANK OF AMERICA (BAC.N)
Sold on March 24 at $13.35. We still like the stock fundamentally. However, defensives have been driving the bus this year.
- Then: $17.43
- Now: $16.47
- Return: -5.51%
- TR: -4.12%
METLIFE (MET.N)
Sold on May 11 at $42.78. We still like the stock fundamentally. However, defensives have been driving the bus this year.
- Then: $50.47
- Now: $46.85
- Return: -7.17%
- TR: -4.51%
WALT DISNEY (DIS.N)
Sold on December 23, 2015 at $105.86. Disney is a best-of-breed media company. However, it is priced accordingly and we had limited upside from our position, so we exited the position.
- Then: $115.92
- Now: $91.93
- Return: -20.69%
- TR: -19.61%
TOTAL RETURN AVERAGE: -9.41%
Disclosure | Personal | Family | Portfolio/Fund |
---|---|---|---|
BAC | Y | Y | N |
MET | N | N | N |
DIS | N | N | N |
TWITTER: @Stephenson_Co, @StephensonFiles
WEBSITE: www.stephenson-co.com