By David Parkinson
Lots of sell-side research departments issue annual outlooks for the economy and stock markets at this time of year. The folks at ScotiaMcLeod have taken it one step further - they've actually issued a list of stock picks for 2010.
In their 25-page 2010 outlook report, Gareth Watson and Geoff Ho, directors in ScotiaMcLeod's portfolio advisory group, identified 10 prominent Canadian stocks that "we feel should be consistent performers in a balanced portfolio" next year. They also identified another 10 stocks "that could add some extra return if fundamentals improve/strengthen".
Here are their lists:
Consistent Performers in Balanced Portfolio
Barrick Gold (ABX)
Canadian National Railway (CNI)
Great-West Lifeco (GWLOF.PK)
Research in Motion (RIMM)
Rogers Communications (RCI)
Royal Bank (RY)
Shoppers Drug Mart (SHDMF.PK)
Thomson Reuters (TRI)
Potential for Extra Return if Fundamentals Improve
Bank of Montreal (BMO)
Brookfield Asset Management (BAM)
Canadian Natural Resources (CNQ)
Crescent Point Energy (CSCTF.PK)
Finning International (FINGF.PK)
Potash Corporation (POT)
Silver Wheaton (SLW)
SNC Lavalin (SNCAF.PK)
Thompson Creek Metals (TC)
"While these lists are not exhaustive, our intention here is to highlight higher-quality names with relatively strong balance sheets, good management teams and a decent track record of past performance," they wrote. "We are not saying these companies will be the top performers of the year, but we do believe they should be considered, depending on what you’re trying to achieve."
Generally, the ScotiaMcLeod strategists have adopted a middle-of-the-road outlook for the economy: The recovery won't stall out, but it will be slow and gradual rather than a rapid rebound. As a result, they said, defensive stocks will remain key holdings in most portfolios, while commodity and financial stocks could be in for a pullback - though Canadian financials will likely outperform their foreign peers.
They also predicted a continued rise in the Canadian dollar - to above-par, relative to its U.S. counterpart, in the second half of the year.
"There is no denying the fact that the rebound for the TSX index [in 2009] has been impressive," they wrote. "While we certainly do not expect the same rate of appreciation for the TSX index in 2010, we are bullish for the Canadian stock market over the long term, and believe this country will be a great place to invest as the global economy accelerates this year and beyond."