Port Coquitlam, B.C.-based analyst Guy Lapierre is focused on finding companies with good dividend yields, but, more importantly, stability and long-term cash flow. Despite the uncertainty and turmoil of the upcoming American presidential election, but expecting more weakness in the Canadian dollar, Mr. Lapierre went looking south of the border.
Reflecting on his recent trades and which companies are currently worth investors’ time and money, Global Securities analyst Guy Lapierre says: “We took a lot of profits out of the last 60 days with some speculative positions. What we’re looking for now is good value with strong cash flow and higher-than-average dividends.”
Mr. Lapierre is a vice-president and portfolio manager at Global Securities. The analyst explains that his brokerage sold off shares in rallying commodity companies to lock in profits because “we thought they were overdone”.
Instead, he suggests picking up stocks that have limited potential to fall in price. To many, that means reaching for dividend-paying companies. However, Mr. Lapierre says he places greater importance on other factors.
“Canadians are yield-hungry. While that’s one of our criteria, we’re looking at stability and long-term cash flow.”
Further, because he expects more weakness in the Canadian dollar in the coming months, the analyst currently prefers companies that trade south of the border. That way, investors can benefit from any rally in the value of the U.S. dollar relative to the loonie.
Of course, the United States is hardly immune from market risks and future uncertainty. Mr. Lapierre notes, for example, that U.S. bank stocks are normally a fine place to “hide” and lock in profits from less-stable businesses during the summer doldrums before interest and activity in commodities picks up again.
Finding a safer haven for profits
Compared to other years, though, financial stocks face much greater scrutiny in 2016 because of the looming election there, says the analyst. Mr. Lapierre predicts that uncertainty about the sector will continue for the next six months to a year as politicians of all stripes discuss reforming or dismantling banks.
“There’s just no telling what’s going to be said.”
Thus, the portfolio manager advocates U.S. global consumer goods stock Procter & Gamble Co. (NYSE─PG) as a safe haven between now and November as well as a ‘best buy’. He says of the consumer staples stock, “We’ll accept the limited upside because of the stability of it.
“That’s derived from the quality, diversity, and just plain range of brands they carry. And they’re essentials, so people will use them,” the analyst adds.
Farther afield but still available in the U.S. via American Depositary Receipt (ADR), global manufacturing stock Toyota Motor Corp. (NYSE─TM) is another of Mr. Lapierre ‘best buys’.
According to the portfolio manager, the auto manufacturer’s new version of its hybrid Prius model is “a practical alternative that’s realistic to drive” compared to fully electric vehicles.
Mr. Lapierre says the model is the preferred option for fleet vehicles such as taxis and adds that it would likely become a favourite among Uber drivers, too.
Even so, he notes there is “some stress” on Toyota’s dividend because it is paid out in Japanese yen.
Still the apple of his eye
Revisiting one of his ‘best buy’ picks from February, Mr. Lapierre says that nowadays he likes U.S. global tech stock Apple Inc. (NASDAQ─AAPL) even more than he did then because its shares have sunk even further.
“In the long term, we feel it will always come around. The fact is Apple is a cash flow machine– less of a product manufacturer and more of an environment in which to generate cash.
“They created an environment where people are comfortable giving 50 cents or a dollar (for media and software like apps, upgrades, and music) on a regular basis.” Further, the purchases are unique and cannot be shared with others, so they have to buy their own as well.
Mr. Lapierre asserts that hordes of investors buy up Apple shares before a product launch and then sell them off after a product launch, as happened following slow sales of the iPhone 6.
Any dampened enthusiasm will recover with the next big launch, in this case the iPhone 7 in the fall.
“It really just pushes revenue back a quarter or two quarters.”
Investor’s Digest of Canada, MPL Communications Inc.
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Investor's Digest of Canada •6/1/16 •