Wednesday, September 14, 2011

Money Show, Hot Stocks and Sectors for 2012

This session involved Lunch with a Panel consisting of Howard God, Editor at Large for Money Show as the moderator and Howard Atkinson, President of Horizons ETFs Inc., Roger Conrad, editor of Utility Forecaster and Canadian Edge, Ryan Irvine, President and CEO of KeyStone Financial Publishing Corp. and John Stephenson, Senior VP and Portfolio Manager of First Asset Investment Management, Inc. as the panelists.

All these panelist had a list of investments for 2012 for us.

Howard Atkinson:
Howard Atkinson said first of all that investors need to do their homework before investing. We have been in a secular bear market since 2000. Canada has done better, but the secular bear market is not going to get much better anytime soon. This is why his company has launched inverse ETFs.

He says that Europe is in trouble and they will have bank amalgamations. US are still in problems with jobs. A home market bias is not bad for Canadians as we have done better than others. However, out problem is that 80% of our exports go to the US. Harper is exploring lots of trade agreements.

Fixed income for investors is difficult because of low yields. If you are getting higher yields on fixed income, you are getting paid more because of greater risk. There is a problem with low interest rates and that is that it encourages people to borrow.

Where Howard feels we should invest, is first in the precious metal stock sector. He commented on the fact that until recently gold was ahead of gold stocks, but now things have changed and gold stocks are breaking out. We can invest in precious metal using ETFs. Suggestions are BMO Junior Gold Index ETF (TSX-ZJG), Goldex Resources (TSX-GDX) and iShares S&P/TSX Global Gold (TSX-XGD). You can also buy options under Horizons Enhanced Income, Gold ETF (TSX-HEP).

There is another type of ETF to buy and they are inverse EFTs. Some are HBP S&P 500 Inverse ETF (TSX-HIU) and HBP S&P/TSX 60 Inverse ETF (TSX-HIX). He feels that the US market is very ugly at this moment.

There is also currency marketing investing. Cash is not paying much. So why not buy Australian current with an interest rate of 4 ½% (Horizons Australian $ E.T.F. (TSX-ASD). There is also a US-China fund Wisdom Tree Dreyfus Chinese Yuan Fund (CYB).

In the Canadian Financial Sector, you should only buy Canadian banks after the European banks have crashed. Canadian Banks will not crash as much, but will go down in sympathy. See iShares S&P/TSX Capped Financials (TSX-XFN) as a possible investment. Also see Horizons Enhan. Incm. Fin. ETF (TSX-HEF) as an inverse ETF.

He thinks that another good play is the Emerging Markets Consumer Sector. Emerging markets have low government debt. Their consumers are alive and well and will soon start to buy. There are currently around 300M of them and by 2020 there will be 4B of them in the middle and upper classes in Asia. In emerging markets the average age is 10 years younger than in the developed markets.

Roger Conrad:
Roger has a newsletter than gives people something to buy. He believes that we should buy good business at good prices. He feels that the economy is where it was in March 2009. There is slow growth, with some parts doing well and other parts not doing well. What is doing well is resources. We also have major pipelines that will unlock our Canadian Oil Sands.

However, he feels we are in for some slow jagged growth. We have low corporate interest rates and therefore a better capital rising climate. 2011 is a rather mixed bag in Canada with good dividend growth. There are emerging markets we can sell to. Our companies are sharing their profits with their shareholders.

He said there will be jagged growth and weak growth in US stocks for Canadian Investors. He says we should look for growth in essential services. There will be new nuclear plants in the US and some plants will have their licenses extended. An example investment would be Entergy Corp. (NYSE-ETR).

He says that wireless phones are taking over all over the world and this is also trues in the US. An example investment would be Verizon (NYSE-VZ). Another good investment might be US water utilities. Water companies are growing and amalgamating as the small ones cannot meet new water standards. An example investment would be Aqua America (NYSE-WTR).

Another place to invest is Pipeline MLPs. An example would be Genesis Energy LP (NYSE-GEL). The last suggestion is in oil-weighted energy producers. An example would be Crescent Point Energy (TSX-GPG). This company did not change their distributions when it converted from an income trust. The stock price was therefore boosted and they used that to growth capital. It is disciplined distribution payer.

Ryan Irvine:
Ryan said that his company is a stock picker. They like companies with dividends and good return on capital. They also like companies with cash and that can buy acquisitions with cash. For example they bought a company in 2008 that had 80% of its market cap in cash.

He said that there is a disconnect with gold and junior gold companies. They like companies with assets that are producing gold. He said they like tech companies with solid cash positions and they like oil servicing companies as a near play. They like mine servicing companies also.

He thinks that we should build our own growing dividend fund by owing 8 to 10 stocks in the category. His choices are Enghouse Systems Limited (TSX:ESL), Monument Mining Limited (TSX-V:MMY), Exco Technologies Limited (TSX:XTC), WiLan Inc (TSX:WIN) and Endeavour Mining Corp (YSX:EDV). I will deal with all these stocks in a later blog entry when I review another talk by Ryan Irvine.

John Stephenson:
John says that on a macho level, he does not who is more screwed up, US or Europe. He does like US better, but the US has real challenges with their entitlement problems. He thinks that they have about 10 years to fix their problem and he can only see slow growth in the future.

He thinks that Europe is the real worry as the risk is with the governments. Everyone is on strike in Greece and there is a 92% probability it will default. He thinks that France, Spain, and Italy may also default as they owe too much to be bailed out. No one in Europe followed the rules. He thinks that in 6 months to 1 year we will have another crisis and it will be led by Europe. Banks there are selling off. Germany does not want to bail everyone out.

The problems with banks are that no one knows which banks are connected. The European bank problem will spread internationally and Canadian banks will be hit.

Are we in a gold bubble? He feels the answer is no. This is because everyone is printing money. He thinks that the Euro will fall apart. The Swiss Franc stopped rising when the Swiss said they will print enough money to keep it lower.

He thinks that people are going to be worried about the return of capital, not yield on capital. He likes oil servicing companies as they are used by all oil companies. Most oil companies are owned by countries not shareholders. He thinks that we should avoid government bonds, because it is the governments that are the problems.

His stock picks are as follows, 1) Cash, 2) Precious Metals (particularly gold), 3) Large capitalized dividend paying stocks (like TransCanada, and Enbridge) and avoid banks, 4) Energy (like Suncor (TSX-SU), Canadian Natural Resources (TSX-CNQ), Halliburton (NYSE-HAL) and Schlumberger (NYSE-SLB)) and 5) Corporate Bonds (as government bonds are to be avoided like the plague).

He says we need to be concerned with return of capital not return on capital.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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