Three stocks for Canadian investors with a global perspective
This Canadian analyst adopts a global view and hones in on three strong areas of investment for the year ahead and three stocks to buy.
With the world’s attention fixed on Vancouver, this is as good a time as any to get a global perspective.
Of course in a couple of weeks the globetrotters will be back home, with or without medals.
An investor’s global perspective should stretch even farther than the slopes of Whistler and last a good deal longer than two weeks.
According to Mr. Brad Moore, a portfolio manager from Calgary, Canadian investors would be wise to focus that perspective on three areas of interest this year — energy, technology and emerging markets.
When Mr. Moore speaks of a global perspective, he doesn’t simply mean casting one’s eye around the globe. He also means peering into every sector of the economy to see where the real growth lies.
Yet it’s also true that robust growth nowadays often comes from firms that have a business address in more than one country.
Mr. Moore has a favourite stock for each of the three areas he likes and he shares them with the readers of Investor's Digest of Canada.
One of the stocks is a Canadian firm that will need little introduction. You may be meeting the other two for the first time.
Far ahead of the competition
As the global economy recovers, it won’t happen at the same pace in every place. The western nations will be the slowpokes, relatively speaking, growing at a two to three per cent GDP pace this year.
The developing nations will go roaring off at an eight to 10 per cent pace. Faster or slower, it’s all good news for energy.
Oil will be the primary benefactor of this growth, says Mr. Moore. And while the “obvious play” might be the direct exploration companies, he thinks there’s an even better way to profit.
He likes the service sector. Specifically, he likes one Canadian stock that is far ahead of the competition in its field. ShawCor Ltd. (TSX-SCL.A) is the world’s top firm in pipeline coatings and the technology that goes with them.
ShawCor already has a worldwide market share of 30 per cent and revenues of $1.3 billion. As oil exploration stretches to keep up with demand, more pipelines will be needed in such far-flung locales as northern Siberia and the ocean depths. ShawCor’s pipe-coating expertise will be more than welcome in these remote and rugged conditions.
Mr. Moore likes the fact that ShawCor is already a global company. 23 per cent of its revenue comes from Canada, 25 from Europe, 25 from Asia, the Middle East and Africa, and 27 per cent from Latin America.
Over the past five years, the company’s compound annual growth rate in net income and earnings per share has been a hefty 25 per cent. The dividend has grown by 29 per cent in those five years.
The yield is one per cent on the $0.28 dividend. The shares have doubled in the past year, to sit at $27.94. Mr. Moore is convinced that, like the world’s pipelines, they have more ground to cover.
Touching screens
Technology stocks are trading at their lowest valuations since 1996. Sounds like just the time to get in, especially since “many of them are debt free with strong balance sheets,” says this analyst.
Spending on technology is sure to rise, he adds, “whether that means smart phones for workers, PC upgrades, new printers or new cellphones.”
He touches on an area that many investors might overlook — touch screen technology. Synaptics (NASDQ-SYNA) has its fingers on this process for everything from smart phones to PCs to laptops to electronic office directories. The technology is spreading fast.
This stock trades at an attractive multiple, says Mr. Moore, not much more than 12 times estimated earnings for 2011. The company is debt free and has $5 per share in cash.
The stock has zipped up by about a dollar and a quarter in the past few weeks, to $27.14. It pays no dividend.
Online in China
Emerging markets have often been viewed, quite rightly, as growing industrial powers soaking up commodities. But Mr. Moore has a different take for his readers in Investor's Digest of Canada. He thinks the theme to focus on for 2010 and beyond is the emerging consumer.
While consumers in the west tighten their belts, the newly affluent customer in the developing world is ready to spend (and has probably been saving at a much better rate than many westerners).
Spending means advertising, and a company in this area you are not likely to have considered is Sina Corp. (NASDQ-SINA). It is the largest online display advertising company in China. It is also the third-most visited website after Baidu (the Chinese Google) and Tencent (a very popular instant messaging site).
It’s also the top source for news outside of the government-owned service. And it deals in mobile service and e-commerce.
In short, says the analyst, it is an advertiser’s “must-have” company. He forecasts a 30 per cent growth in earnings this year. Management has recently taken a larger chunk of shares, making it the largest shareholder.
The stock has slid down from its $47 high in November, but has pushed back up and is now at $37.76. It has no dividend.
The whole point of having a global perspective is to take a fresh look at both the familiar and the unfamiliar. In the process, you are liable to discover some appealing opportunities you’d never thought of before.
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