Canaccord Adams equity strategist Nick Majendie introduced changes to his list of "ten stocks to own," this week, replacing four names and keeping six from the previous update back in late October.
The mainstays are Barrick Gold Corp. (NYSE:ABX), Bank of Nova Scotia (NYSE:BNS), Manulife Financial Corp. (NYSE:MFC), Potash Corp. of Saskatchewan Inc. (NYSE:POT), Suncor Energy Inc. (NYSE:SU) and Teck Cominco Ltd. (NYSE:TCK). These stocks are joined by Brookfield Asset Management Inc. (NYSE:BAM), Finning International Inc. (OTCPK:FINGF), Telus Corp. (NYSE:TU), and Vermilion Energy Trust (VETMF.PK).
The deletions, meanwhile, are Goldcorp Inc. (NYSE:GG), Nexen Inc. (NXY), SNC Lavalin Group (OTCPK:SNCAF) and Thomson Reuters Corp. (NYSE:TRI). According to Mr. Majendie these companies were dropped because of substantial gains since the end of October.
Of the companies on the new top 10 list, Mr. Majendie told clients that he is comfortable with everyone's balance sheet, with the exception of Teck "where the financial risk is greater."
However, based on our interview with the company just prior to Christmas and despite downgrades in cash flow estimates, we believe that Teck has enough diversity of operations and enough flexibility to get its bridge loan down to manageable levels between now and September.
Of the companies added to the list of ten, Mr. Majendie singled out Finning and their emphasis on free cash flow.
Net rental additions should be down substantially this year to near zero instead of being a large consumer of capital. In addition, the company plans to whittle down its inventories, and payments to CAT should drop sharply in Q2. This should get the company’s debt/equity to or below its targeted range by the end of the year.