12 blue chip stocks for superior total return

If investing isn’t the most contrary business you will ever know, it’s certainly the most humbling – regardless of expertise or reputation!

A year ago famed author and forecaster Harry Dent led off 2012 with dire warnings of a summertime global stock market crash.

His advice: “get 100 per cent out of stocks.” Those who did would today be significantly the poorer.
Not so much because Mr. Dent was wrong in his fundamental economic and fiscal forebodings, just that ever-contrarian stock markets saw fit to over-ride them.

For one thing, near-zero interest rates don’t offer much of an alternative when weighed against yields on the safest of dividends – both with the prospect of  growing as companies raise their annual dividend payouts to shareholders.

The dividend alternative, a major 2012 contributor, is a groundswell that shows every sign of continuing as strengthened corporations raise their dividend payouts and central bankers pledge to keep interest rates artificially low.

There’s also that oldest of investment adages about the trend being the investor’s friend.  It’s a truism that began taking on fresh legs in 2012 despite as daunting a list of “what ifs” as Mr. Dent and other doomsters could have wished for.

At the same time, what if some of these “what ifs” were to become game-changing tipping points?
More than ever America needs a plan for comprehensive fiscal reform. But, what if a recovering U.S. economy and its suddenly-booming energy sector were to make those ballyhooed fiscal cliff and debt ceiling impasses that much more manageable?

The Congressional Budget Office’s latest lowering of its deficit estimates to the $850 billion level from over a trillion must add to this possibility.

If a more experienced President Obama and a more pragmatic new Congress were to strike an acceptable deficit-reduction bargain, there would be a tremendous relief rally in the U.S. stock markets, with ripple effects around the world.

What’s more, there could already be a market precedent to add to this optimism.

In 1983, the Dow Jones Industrial Average finally recaptured the magic 1,000 level it had first reached in 1966. Thousand point increments thereupon followed regularly.

Could the same again be true as the S&P 500 index (broad market) makes it back up to the 1500 level, its post-Y2K, new-millennium peak of the year 2000?

A 17-year long base in the one instance, 13 years in the other: History would suggest we stay tuned and invested.

In similar vein, there is America’s stunning march toward energy independence and self-sufficiency.  The multiplier effects of ultra cheap natural gas and abundant oil stand to be enormous, the investment possibilities prodigious.

In Canada, approval of the anxiously awaited northern (cross-border) leg of the Keystone XL oil pipeline would not only provide a much needed shot in the arm for landlocked Alberta and its costly “bitumen bubble,” an entire nation would rejoice.

Its approval would also bring a reminder of our super power energy potential. Suffice to say, the Canadian stock market reaction would be ecstatic.

Here are six broadly diversified stocks that are representative of the Canadian economy.


Bank of Nova Scotia: Canada’s most international bank, especially Latin America, pending China application, ramped-up growth in wealth management.

Brookfield Asset Management: Real estate dominance combined with renewable power, infrastructure, and financial – all great business to be in.

Canadian Pacific: Huge catch-up potential in lowering operating cost ratio from the low 80s to the low 70s; thank you Hunter Harrison.

Encana/Cenovus: Natural gas/shale North America wide pre-eminence “friendlier” oilsands/SAGD technology.

Enbridge: Magnificently diversified and positioned pipeline and energy-processing powerhouse.

Thomson Reuters: Extensive centralization and reorganization, new president, electronically generated information an ever-accelerating business, just increased dividend.

Artis REIT: Commercial property leadership, ownership and management in Western Canada.

Bank of Montreal: Attractive dividend yield, $4 billion Marshall & Ilsley acquisition in U.S. Midwest.

BCE: More and more a diversified telecommunications power-house, financial strength to keep raising its dividend.

Inter Pipeline: Exceptional oil and NGL transporter, dividend machine, strong (ample) cash flow.

Power Corporation: Financial diversification, life insurance come- back potential, stakes in Europe, growing interests in China.

TransAlta: Conversion from coal to natural gas power plants, partnership with MidAmerican Energy (Berkshire Hathaway/Buffett), dividend-supportive cash flow.



– The MoneyLetter


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