Bullish buyers with a penchant for progress shares have been as soon as once more victorious in 2019 after the S&P/TSX Composite Index delivered its greatest efficiency of the last decade and the S&P 500 gained 30 per cent. Market watchers are principally anticipating one other strong yr in 2020, however potential returns may be delivered by a unique group of shares than people who powered the market ahead in 2019. The Monetary Publish requested 10 portfolio managers to select one inventory of their portfolios they felt might outperform the pack.
Barry Schwartz, chief funding officer, Baskin Wealth Administration
The inventory: Amazon.com Inc. (Nasdaq/AMZN)
By its personal excessive requirements, Amazon had a disappointing yr since its share worth solely elevated 15 per cent, underperforming the S&P 500. One of many causes that occurred, Barry Schwartz stated, is as a result of it spent US$800 million to deliver one-day delivery to the market in April for Prime members. The corporate is now setting its sights on increasing this system internationally. Such initiatives are consuming into Amazon’s backside line and it’s not anticipated to publish strong earnings for the subsequent three quarters, Schwartz stated. Although the corporate is approaching a US$1-trillion market cap, its inventory continues to be undervalued at present ranges. If it surprises buyers and reverses course, he stated, the inventory might shortly rally to US$2,500 in 2020 from about US$1,900 close to the top of December.
Norman Levine, managing director, Portfolio Administration Corp.
The inventory: Berkshire Hathaway Inc. Class B (NYSE/BRK.B)
Norman Levine thinks of Berkshire Hathaway because the “final worth inventory.” The Omaha, Neb.-based mostly conglomerate has been mired in a holding sample for the previous two years, buying and selling between US$185 and US$220, however lastly “caught its nostril up” in late November, he stated. Worth shares have grossly underperformed momentum shares for the previous three years, Levine stated, however investments within the former have picked up, hinting that a full market shift towards them might happen in 2020. Ought to that rotation happen, Berkshire Hathaway could possibly be arrange for an enormous yr, though the supervisor warns that a momentary selloff might happen ought to vice-chairman Charlie Munger, ninety five, or chief government Warren Buffett, 89, cross away.
Rick Ummat, co-founder, Jemekk Capital Administration
The inventory: Liveperson Inc. (Nasdaq/LPSN)
Millennials don’t take pleasure in talking on the telephone, Rick Ummat stated, and Liveperson gives them an alternate. The New York-based mostly firm’s software program makes use of synthetic intelligence-powered chatbots to unravel easier queries by way of textual content message or escalate them to a stay agent. Corporations reminiscent of Grupo Financiero Santander México and Huawei Applied sciences Co. Ltd. are already utilizing the know-how and Ummat stated there’s potential for wider adoption as soon as others understand there’s no have to tie up scant human assets with points that may be quickly solved by a bot. Liveperson, Ummat stated, introduced that it’s scaling again on profitability as a way to make investments throughout 2020, so there may be some churn within the investor base. However he has seen this pivot occur earlier than, and when it’s executed proper, as Fb Inc. did, the outcomes are spectacular. “It might be a multi-compounding story for years to return,” he stated.
Mike Archibald, portfolio supervisor, AGF Investments Inc.
The inventory: Parex Assets Inc. (TSX/PXT)
The Canadian oil sector’s struggles over the previous 5 years have been nicely-documented and have pressured a majority of producers to tackle crushing quantities of debt in an try and proceed to develop. Mike Archibald stated that isn’t the case for Parex Assets. The Calgary-based mostly firm has about $300 million in money on its stability sheet and no debt, he stated. “I might characterize them as having the cleanest stability sheet of any North American producer.” The surplus money it generates has been used on buybacks and Parex has already dedicated to buy one other 10 per cent of its inventory in 2020. The corporate’s valuation, like most oil shares, is reasonable, regardless that its inventory generated a return of greater than forty per cent return in 2019. With international progress poised to select up in 2020, Archibald stated, oil shares might lastly escape and Parex could possibly be in line for an additional yr of strong progress.
Mike Newton, portfolio supervisor, Scotia Wealth Administration
The inventory: Open Textual content Corp. (TSX/OTEX)
The Toronto Inventory Change might have its limitations on the subject of know-how performs, however Mike Newton stated one in every of its few software program shares is nearly “bulletproof.” Open Textual content, which offers info administration software program that permits companies to handle workflow, continues to be missed by the funding group. “It’s a free-money-move machine,” he stated, pointing to the $1 billion in money the corporate reported in its first-quarter 2020 earnings on the finish of October. That pile might permit Open Textual content to be much more lively within the M&An area after shopping for cloud safety software program maker Carbonite Inc. for $1.forty two billion in 2019. Newton sees double-digit dividend progress in 2020 for Open Textual content and a 20 per cent improve in free money stream.
David MacNicol, founder, MacNicol & Associates Asset Administration Inc.
The inventory: Diamond Estates Wine and Spirits Inc. (TSXV/DWS)
Diamond Estates Wine and Spirits has twice filed for chapter in its temporary historical past, however David MacNicol isn’t involved it’s heading for a 3rd. Diamond Estates is his play on wine turning into obtainable for buy at comfort shops in Ontario. The corporate’s inventory is buying and selling simply above 20 cents, however MacNicol expects which will change on account of a reverse cut up in 2020. One of the best factor that has occurred to the Niagara-on-the-Lake, Ont.-based mostly producer, he stated, is that it has partnered with Lassonde Industries Inc. and could have entry to one hundred forty individuals on the agri-meals firm’s gross sales workforce to attempt to make sure that Diamond Estates wine is extra extensively out there. The partnership will give Diamond a bigger gross sales drive at its disposal than its two central rivals, Andrew Peller Ltd. and Artera Wines Canada Inc., mixed. Buyers ought to search for the corporate’s inventory to double in 2020, MacNicol stated.
Ryan Bushell, president, Newhaven Asset Administration Inc.
The inventory: Inter Pipeline Ltd. (TSX/IPL)
Ryan Bushell can be content material if Inter Pipeline’s inventory remained flat in 2020 since his shoppers would nonetheless internet a 7.5-per-cent return via the Calgary-based mostly firm’s dividend yield. However with the excessive dividend comes a good quantity of danger. Inter Pipeline is constructing a petrochemical facility for 2021 and has $three.5 billion tied up within the undertaking, which can act as a forty-per-cent raise to EBITDA as soon as it’s accomplished, he stated. The power continues to be a chance and has added to the $three.1 billion in debt Inter Pipeline reported on the finish of September. The corporate is trying to derisk the venture by promoting its storage and fuel enterprise in the UK, which Bushell stated might yield $1 billion. If the sale is profitable, it might act as a catalyst for the inventory. However ought to Inter Pipeline encounter any delays or issues with its new facility, buyers can anticipate its inventory to slip.
Christine Poole, chief government, GlobeInvest Capital Administration Inc.
The inventory: House Depot Inc. (NYSE/HD)
Christine Poole has for years deployed the identical technique of concentrating on basically sound giant-cap shares which were victims of a current decline after which driving them again as much as their subsequent plateau. She had been ready on this sample to happen in order that she might add House Depot to the portfolios of latest shoppers and eventually acquired her probability. After reaching its fifty two-week excessive of US$239.31 in November, House Depot’s inventory dropped 10 per cent when the corporate minimize its full-yr gross sales progress steerage. That slip, Poole stated, was as a consequence of a US$eleven-billion funding plan that may hit its peak subsequent yr and, consequently, soften margins. In any other case, each america financial system and the house-enchancment sector are nonetheless wholesome and can proceed to develop subsequent yr, she stated, leaving House Depot in a great place to profit.
Andrew Simurda, vice-president, JCIC Asset Administration Inc.
The inventory: Manulife Monetary Corp. (TSX/MFC)
Manulife Monetary beneath chief government Roy Gori has considerably derisked its enterprise to the purpose that its enterprise mannequin and efficiency have develop into much more predictable, Andrew Simurda stated. Its stability sheet has improved and is now carrying extra capital, which could possibly be utilized in 2020 to re-enter the M&A market, notably in Asia the place its riskiest belongings lie, or proceed to aggressively purchase again inventory as a consequence of what Simurda stated is a reduced valuation. Based mostly on worth-to-earnings and worth-to-e-book valuations, he stated Manulife’s inventory might attain $33.50 subsequent yr, a 27 per cent improve from about $26 close to the top of December. There are dangers right here although: a strengthening Canadian greenback and continued tensions in Hong Kong might derail Manulife’s outlook.
Jason Del Vicario, portfolio supervisor, Hillside Wealth Administration, HollisWealth
The inventory: Boyd Group Revenue Fund (TSX/BYD.UN)
Boyd Group Revenue Fund has “probably the most lovely 10-yr chart you’ve ever seen,” Jason Del Vicario stated. The Winnipeg-based mostly collision restore store operator’s inventory has grown to greater than $200 from $5.forty five throughout these years, with only one deep selloff on the finish of 2018. In 2020, the revenue belief plans to transform to an organization, which Del Vicario expects will end in extra consideration from overseas buyers, provided that any limitations on them imposed by the revenue belief construction will probably be dropped. At that time, he stated, buyers might start to comprehend that Boyd nonetheless solely has a free money move yield of six per cent, which makes it fairly low cost. “This may sound ridiculous however … we might see one other 50 per cent rise within the safety in 2020.”