Paul Harris.
Paul Harris is partner and portfolio manager at Avenue Investment Management. His focus is North American and global equities.
Top Picks:
Qualcomm Inc. (QCOM NASDAQ)
Qualcomm is an industry leader with a dominant market share in a growing industry. It has a well-developed market road-map and is generations ahead of its competitors. Revenues and EPS are growing of 10 per cent+ CAGR over the next five years. Qualcomm has an attractive valuation at 13.9x eps plus a dividend of 2.3 per cent and a commitment to returning capital to shareholders. The issue with China is a buying opportunity.
Bank of America (BAC NYSE)
Bank of America is one of the largest banks in the United States holding 10 per cent of all deposits in the country. The bank continues to restructure by selling off non-core assets and reducing cost through reduction in headcount. The company continues to improve its capital base. The stock trades at 0.8 times book value and 11 times 2015 earnings. The company is buying back stock and will be increasing its dividend over the next several years from its present yield of 1.2 per cent.
Microsoft (MSFT NASDAQ)
Mircorsoft has limited downside and good upside; we believe the risk/reward trade-off is compelling. We continue to see operational momentum improving with a raft of new products. The stock trades at 15 times earnings, has a 2.6-per-cent yield, has free cash flow of $27-billion (U.S.) a year, gross margins 68 per cent and $85-billion in cash and ex-cash the stock trades at 11x earnings.
Past Picks: November 7, 2013
Mainstreet Equity (MEQ TSX)
Then: $31.98; Now: $40.00 +25.10%; Total return: +25.10%
Regions Financial (RF NYSE)
Then: $9.26; Now: $10.14 +9.50%; Total return: +11.21%
Microsoft (MSFT NASDAQ)
Then: $37.50; Now: $47.75 +27.33%; Total return: +31.80%
Total return average: +22.70%
Disclosure: | Personal | Family | Portfolio/Fund |
MEQ | Y | Y | Y |
RF | Y | Y | Y |
MSFT | Y | Y | Y |
Market outlook:
Global stocks should continue their slow long-term "grind" higher due to low interest rates, high corporate probability and continued global GDP expansion. Bond yields will continue to stay low for the short and medium term as central banks withdraw monetary liquidity slowly. We think the opportunity is increasing in companies that can achieve good total return – a good dividend yield accompanied by strong balance sheets and high cash flow cover. In a low inflation, low yield environment, stock are likely to remain attractive.