Norman Levine, Managing Director, Portfolio Management Corporation

FOCUS: North American Large Caps

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MARKET OUTLOOK:

We have been looking for a decent market correction for some time and it remains to be seen if we will get one but, for most of the year so far, we have been having a generally sideways market. We would actually welcome a nice correction as it would bring valuations more into line and hopefully create some bargains for us to spend some of our cash on. Could be, though, that the best we may get is a continued directionless market until the outlook for world economies and interest rates become clearer. This is a time where active management benefits and passive management lags as active managers are able to take advantage of market and individual stock anomalies and sideways volatility. For those of you who have been attracted to the passive management story, keep in mind that it works best in rising (especially rapidly rising) markets but does nothing for you in flat or declining markets. Near term bias (especially in the U.S. where markets have only gone up since 2009) has made passive management the flavour of the times. Be careful not to let the past influence your future thinking.

Top Picks:

Stantec (STN.TO) Bought on September 14, 2016 at $30.22

Stantec is an engineering and design company that we bought to benefit from the expected surge in provincial and federal government infrastructure spending as well as the ongoing recovery in commodity prices. It grows both organically and through acquisitions. Its most recent acquisition was MHW Global, which gives it increased exposure to the high-growth water engineering business as well as increasing its presence in the U.S. The more recent sale of MHW’s software division for US$270 million was an unexpected bonus as it was not key to Stantec and will go nicely to reducing the company’s debt. Since initiating its dividend in 2012, Stantec has increased it each year and currently yields 1.4 per cent.

MetLife (MET.N) Bought on September 20, 2016 at $44.12

MetLife is a return on investment story through both the separation of its retail business and a $1 billion cost cutting program. Higher interest rates and a potential share buyback would add to the upside. MET is our kind of stock. It is not well liked and trades where it did in 2010 due to the poor industry environment, being classified as a SIFI (Strategically Important Financial Institution), and constant charge-offs. While higher interest rates would be great for the stock, the coming spin-out of its capital hungry retail life insurance business (Brighthouse Financial), a hope that the government appeal on it no longer be classified as SIFI (too big to fail) will be dismissed, and a $1 billion cost cutting program are the keys to the stock working. In the meantime, the current 3.1 per cent yield is nice to get while we wait.

Sanofi SA (SNY.N) Bought at 41 on July 7, 2016

Sanofi (formerly Sanofi-Aventis) is a French-based multinational healthcare company focused on pharmaceuticals, animal health, and human vaccines. Like most other drug stocks have experienced, Sanofi faces a patent cliff as many of its major drugs come off patent and, also like most other drug companies, its immediate product pipeline is pretty bare. Historically, this is the best time to buy drug stocks to make a lot of money, when nobody wants them. Sanofi has a great balance sheet and will use that money to buy companies with promising new products. In the meantime, the dividend is safe and provides a yield of about 3.3 per cent. The trend in the French election is promising for French stocks. Sanofi is for patient investors, not people looking for quick money.

Disclosure Personal Family Portfolio/Fund
 STN
MET 
SNY 

 

Norman Levine - Top Picks

Norman Levine of Portfolio Management Corp shares his top picks: Stantec, MetLife and Sanofi.

 

Past Picks: MAY 2, 2016

Power Financial (PWF.TO)

  • Then: $33.03
  • Now: $35.12
  • Return: +6.33%
  • TR: +11.76%

Cara Operations (CARA.TO)

  • Then: $31.68
  • Now: $25.30
  • Return: -20.14%
  • TR: -18.96%

Kuehne und Nagel International (KNIN.VX) (as of April 28/17 – European Labour Day is today)

  • Then: CHF 138
  • Now: CHF 150.40
  • Return: +8.99%
  • TR: +13.11%

Total Return Average: +1.97%

Disclosure Personal Family Portfolio/Fund
PWF Y Y Y
CARA Y Y Y
KNIN Y Y Y

 

Norman Levine - Past Picks

Norman Levine of Portfolio Management Corp reviews his past picks: Power Financial, Cara Operations and Kuehne und Nagel International.

Twitter handle: @levinepmc

Website: www.portfoliomanagement.ca