Potash, Manulife, Nexen: Jones' Manager Picks

Manager: Shane Jones, Managing Director Canadian Equities at Scotia Cassels
Style: Dividend Growth
Fund: Scotia Canadian Dividend
Strategy: Looking for companies principally in Canada with consistent dividend growth. This fund is designed for the low risk, long term equity  investor.

Bullish On:

Potash Corp. of Saskatchewan Inc. (POT)
Manulife Financial Corp. (MFC)
Nexen Inc. (NXY)

Bearish On:

ATCO Ltd. (ACLLF.PK)

PREVIOUS PICKS 

 Commentary:

"This is a classic defensive fund so it's built to outperform the market in times of rapid market declines. We've made some changes to sector weights through this period but we continue to focus on companies that provide solid free cash flow and potential for dividend growth in the future.

"Potash Corp. has been a victim of the hedge fund deleveraging that has taken place in the market. We still view this stock positively, based on a growing middle class in emerging markets like China and India. A growing middle class means greater demand for grain supplies as better diets become affordable. Acreage is not growing, so you need a better crop yield and to do that, more fertilizer and crop nutrients are needed. Once fundamentals come back into play on the market, Potash will outperform.

"Manulife has been in rapid decline this past month on concerns it may have to raise capital. On Tuesday, regulators gave insurers some capital relief and we think that will reduce the need to raise capital through equity markets, although Manulife may still try to raise capital via alternative avenues like the bond market. That said, we think Manulife might get some regulatory relief from the U.S., as well, which would really reduce the amount of capital it would need to raise.  I don't think it will recover all of its lost share value, but Manulife should do pretty well over the near term.

"Nexen has been in the news this week as a potential takeover target. CEO Charlie Fischer is stepping down and from all accounts he was a major block to any type of consolidation. The stock is up Wednesday but over the past few months has been beaten down. Nexen owns 50% of the Long Lake asset that has struggled to get up to production and has had high cost overruns. However, its other assets have performed very well. Nexen has been buying back stock, so it's not a great dividend-paying stock, but with the amount of free cash flow it generates, even if it does not become a takeover target and phase 1 of Long Lake does ramp up sometime in 2009, this company will generate even more free cash flow, enabling it to look at growing the dividend.

"Most stocks are so beaten up, we're not sure there's much out there to sell. That said, one company we are inclined to stay clear of is ATCO Ltd. The stock price has suffered and I don't see it going much lower, but at the same time I don't see much impetus for this stock price to really rise in the near term."  

Selected holdings:

Royal Bank of Canada (RY)
Toronto-Dominion Bank (TD)
Bank of Nova Scotia (BNS)
Manulife Financial Corp.
Suncor Energy Inc. (SU)

One-year annualized return: - 10.6%
Three-year annualized return: 3.7%
(Through Sept 30, 2008)
(Mr. Jones co-manages the fund with Britt Doherty)

Morningstar rating: Four star
 

All data provided by Morningstar unless otherwise noted
*Data provided by company

Photo by Peter Redman/National Post

Comments

[Deltaxray7:]

I sure hope POT goes up,
It's down 66% in just a couple of months,
It will soon be a penny stock at this rate.....

Why do I always buy high.?????????????

2008 Nov 13 03:39 PM