I want to first thank Seeking Alpha for the ticket and The Money Show for a fantastic 3 day conference in Toronto with interesting and engaging panels and an exhibition room and a
The show opened with opening remarks from Marty Cej (managing editor and anchor, BNN), Charles and Kim Githler (MoneyShow), and others.
Jim Jubiak, the Senior Markets editor for MoneyShow.com, spoke about the markets and risks that lie ahead in 2011 and 2012. He focused on Contra ETF’s and their value to investors in these uncertain times.
Investors should watch corporate earnings in the coming quarters for a sign of a slowdown in corporate profits.
Robert Gorman, the chief portfolio strategist for TD Waterhouse Canada, Inc. then joined U.S. with his Investment Outlook for 2012 which has six main themes. He prefaced the themes by saying that the odds of a double dip have moved up to 40% and that we will avoid a double dip recession but is concerned nonetheless.
For 2012 moderate growth can be expected but no inflation as oil prices have come off their highs.
We appear to be at the end of PE compression and the markets appear reasonable valued.
Fed policy in the U.S. continues to be accommodative. Fears of a double dip will recede and he expects a strong 4th quarter as the headwinds from Japan recede, supply chains are rebuilt, and a rally is possible with the Dow ending the year with a double digit return.
The first theme is that 2012 will provide investors with single digit returns.
The second theme is that large caps will outperform small caps and this may be a major turn with huge implications. We will see a shift to dividend stocks and a new era of fiscal conservatism in the United States.
In the U.S., investors should look at Johnson & Johnson (JNJ) which sells at roughly 12 times earnings, one of the few remaining AAA rated corporations, a 3.5% dividend yield, and recently received approval for Prostrate and HIV drugs from the FDA.
PepsiCo (PEP) is an undervalued corporation with lots of overseas potential and 39 years of dividend increases.
In the tech sector, IBM (IBM) and Oracle (ORCL) were his picks for investors to do some due diligence. IBM has undergone a complete transformation and is showing growth once again while Oracle’s database software is undervalued by the market.
The third theme surrounded the Canadian market and banks paying strong dividends. In the banking sector investors should do their homework on Royal Bank of Canada (RBC) and the Bank of Nova Scotia (BNS), both of which are undervalued at current levels [on a side note the author loves how TD Bank (TD) has integrated the operations and practices of Commerce Bank which will lead to future growth both in Canada and the U.S.]
The fourth theme surrounded the fixed income space. Investors need to stop thinking of income and growth with low yields.
Coupon returns are in the 1-3% range but investment grade corporates will do the best.
The fifth theme was to avoid southern Europe and bet on northern Europe. You want to focus on companies with strong overseas sales, solid yields, and defensive business lines.
Stocks that fit this criterion were Nestle (OTC:NSRGY) and Diageo (DEO) in the consumer space, British Petroleum (BP) beaten up after the Deepwater Horizon spill but have value, and Standard Chartered Bank (OTC:SCBFF) which has been beaten up with all of the banking problems but globally diversified operations help.
The sixth and final theme is the emerging markets area. China has outperformed but remains in negative territory.
Outperformance may not continue in the future and going looking we may see only single digit returns. China and Russia provide the best values in the Emerging Markets space.
Jim Jubiak then provided his viewpoints on the markets. The solution to the problems in 2011 has been to kick the can down the road and the global economy will see 18 months of slow or no growth.
Greece will default, the only question is when and the ECB is showing an erosion of credibility to the markets.
An unpredictable bank failure, possibly in France, will be coming in the future.
U.S. efforts to reduce the deficit become harder yet by doing nothing the odds of a recession increase with the risk of a second downgrade of U.S. debt in 2013.
There is a good chance for a yearend rally.
More coming in Part 2 with Dennis Gartman’s comments.