A portfolio manager from Canaccord Genuity shares his top three stock picks
Wolfgang Klein, a portfolio manager with Canaccord Genuity Wealth Management, gives WP his top three stock picks.
Growth pick: General Motors, GM-US
“I recently purchased GM for growth,” says Klein. “The balance sheet has been restructured with debt to equity at 1.2 times. Fundamentally, the company has never been sounder; trading at 6 times PE, a > 4% dividend yield, an increased focus on higher margined SUVs and trucks, and it is a Trump trade, to some degree. Under the new financial regime GM has a break-even point of roughly 11 million vehicles, which is much lower than under the old GM.”
Balanced pick: A&W Restaurants, AW.UN-T
“For my balanced mandate I recently added Keg and A&W. Both are old income trusts and continue to operate as royalty trusts, distributing the ‘brand’ royalty generated by each store back to the shareholder. A&W has grown its dividend over the years through a combination of increased same store sales and, more importantly, adding new stores to its portfolio - currently 800 strong in Canada. The gross royalty has grown from $9 million in 2005 to an estimated $34 million this year.”
“I would expect same store sales to increase by 2 - 4% and store adds to increase by a similar amount. Net the last 12 months, the royalty pool increased by 10%, with much of this flowing directly to the shareholders. With a 4.5 dividend yield and steady royalty income, I find it a suitable investment for moderate income equity investors.”
Conservative pick: Granite REIT
“I own a couple REITS in my conservative mandate including CREIT and Granite Reit. Granite REIT was my most recent addition so I will focus on it. Trading at a 10% discount to NAV with an implied cap rate of almost 9%, I can see good value here. The almost 6% dividend yield doesn’t hurt either. The company recently took significant steps forward to de-risk the business from having too much Magna exposure. It also extended leases with Magna, providing further long-term certainty of occupancy. Lastly, the company increased its term to maturity in its leases from an average maturity of 4.7 years to 7.4 years. Granite has good visibility, is good value and pays a solid, well-funded dividend.”
The views expressed do not necessarily reflect the opinion of Canaccord Genuity Wealth Management. This does not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors.
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Growth pick: General Motors, GM-US
“I recently purchased GM for growth,” says Klein. “The balance sheet has been restructured with debt to equity at 1.2 times. Fundamentally, the company has never been sounder; trading at 6 times PE, a > 4% dividend yield, an increased focus on higher margined SUVs and trucks, and it is a Trump trade, to some degree. Under the new financial regime GM has a break-even point of roughly 11 million vehicles, which is much lower than under the old GM.”
Balanced pick: A&W Restaurants, AW.UN-T
“For my balanced mandate I recently added Keg and A&W. Both are old income trusts and continue to operate as royalty trusts, distributing the ‘brand’ royalty generated by each store back to the shareholder. A&W has grown its dividend over the years through a combination of increased same store sales and, more importantly, adding new stores to its portfolio - currently 800 strong in Canada. The gross royalty has grown from $9 million in 2005 to an estimated $34 million this year.”
“I would expect same store sales to increase by 2 - 4% and store adds to increase by a similar amount. Net the last 12 months, the royalty pool increased by 10%, with much of this flowing directly to the shareholders. With a 4.5 dividend yield and steady royalty income, I find it a suitable investment for moderate income equity investors.”
Conservative pick: Granite REIT
“I own a couple REITS in my conservative mandate including CREIT and Granite Reit. Granite REIT was my most recent addition so I will focus on it. Trading at a 10% discount to NAV with an implied cap rate of almost 9%, I can see good value here. The almost 6% dividend yield doesn’t hurt either. The company recently took significant steps forward to de-risk the business from having too much Magna exposure. It also extended leases with Magna, providing further long-term certainty of occupancy. Lastly, the company increased its term to maturity in its leases from an average maturity of 4.7 years to 7.4 years. Granite has good visibility, is good value and pays a solid, well-funded dividend.”
The views expressed do not necessarily reflect the opinion of Canaccord Genuity Wealth Management. This does not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors.
Related stories:
Advisor: These are my top stock tips
An insider’s investment picks
