RBC's 30 global stock picks for 2015

Despite a tough year in 2014, RBC Dominion Securities forecasts a more than 40-per-cent upside for the online retailer in 2015.LEON NEAL/AFP / Getty Images

The 30 global stock picks from RBC Dominion Securities Inc. sound a bit unwieldy until you realize that they form three big themes for 2015: Get bullish on U.S. consumer stocks, buy beaten-up resource producers and prepare for higher U.S. interest rates.

"Yes, we believe the U.S. recovery is strong enough to shoulder what has been a jagged, and at times, inconsistent global recovery," the strategists said in their outlook.

They believe the S&P 500 will rise to 2,325 by the end of next year, implying a gain of about 12 per cent. That's pretty bullish relative to some of the more cautious outlooks for next year from other strategists.

Bank of America, for example, predicts the benchmark index will rise to 2,200; Goldman Sachs, just 2,100.

For the folks at RBC, their upbeat outlook rests on a few assumptions that might rattle some investors.

For one, they believe that the Federal Reserve will move aggressively to normalize its highly stimulative monetary policy, largely because the economy is stronger today than at the start of the last rate-hiking cycle, in 1994.

"Given the fragility of the global recovery, the market currently prices in only a modest rate-hiking cycle with a very low peak," the strategists said. "We expect a hiking cycle that is earlier, faster, and peaks higher than the market is currently expecting."

Speaking of fragility, they believe Europe is mired in long-term problems, including high unemployment and a fractured political backdrop.

Elsewhere, emerging markets will wrestle with volatile commodity prices and weaker currencies; China's economic growth will slow to 7.1 per cent, which is shy of a hard-landing but disappointing; and Japan will muddle along with very low growth.

No wonder RBC's investment themes rest on a stronger U.S. dollar and a relatively fast-growing U.S. economy which stands apart from the rest of the world.

Their enthusiasm for consumer stocks draws not only from the retail sector, but also advertising, auto sales and technology.

Amazon.com Inc. has had a tough year in 2014, falling 20 per cent year to date after reporting disappointing quarterly guidance and feeling some pain associated with Japanese tax increases and the failed launch of its Fire Phone.

But RBC analysts believe the online retailer should benefit in 2015 from a price increase for its Prime service, the expansion of same-day and next-day delivery service and more demand for consumer packaged goods. The upside to the share price, according to RBC: More than 40 per cent.

They see even better things ahead for Marvell Technology Group Ltd., which makes circuits for smartphones. In particular, they like the company's exposure to fast broadband technology, known as LTE, and its share buyback program. The upside: More than 50 per cent.

If RBC is correct in its prediction for Fed rate hikes in 2015, some financial firms should handle higher rates better than others.

A percentage point rate hike over the next 12 months would drive the net interest income for PNC Financial Services Group Inc. up 2.8 per cent. Another percentage point rate hike would drive net interest income up another 7 per cent, according to RBC's calculations.

Similarly, RBC argues that Toronto-Dominion Bank is the best-positioned Canadian bank for rate hikes, and analysts like its mix of U.S. and Canadian retail franchises.

But if out-of-favour stocks are more your thing, RBC is making a brave step toward resource stocks, many of which are down sharply this year.

The key, though, is to select stocks that are better-positioned to withstand ongoing volatility in the near-term, rather than betting on a rebound in commodity prices.

Among their top recommendations: Suncor Energy Inc., which they see as a defensive energy holding with a strong balance sheet; Marathon Petroleum Corp., which has a good mix of refining assets in the Midwest and Gulf Coast; and Agrium Inc., which should see free cash flow surge higher as capital expenditures wind down.

RBC's average upside for all three stocks is about 30 per cent.

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RBC Dominion Securities' Top 30 Global Ideas for 2015:

Actavis (ACT-N)

Agrium (AGU-T)

Air Lease (AL-N)

Amazon.com (AMZN-Q)

Amphenol (APH-N)

Assicurazioni Generali (G IM-Milan)

Aurizon Holdings (AZJ-ASX)

BG Group (BG-LSE)

Boston Properties (BXP-N)