It’s been a couple of weeks since RBC Capital Markets released its top 30 global equity ideas
for 2015. Here are WP’s five favourites.
Hennes & Mauritz AB:
Better known as H&M, the Swedish retailer should do very well south of the border in 2015. Lower gas prices have goosed discretionary spending; nowhere will this be felt more than in retail. H&M’s U.S. sales over the past five years have doubled and now represent more 10% of the company’s overall revenue. With H&M planning to add as many as 400 stores annually, many of them in the U.S. and China, its growth ramp appears quite lengthy.
Brookdale Senior Living:
This past July Brookdale merged
with Emeritus Senior Living making the combined company the largest owner-operator of senior housing in the U.S. With 1,200 properties across the U.S. generating $4.9 billion in combined 2013 revenue, the new Brookdale is a force to be reckoned with in the increasingly competitive world of senior housing.
With revenue synergies of up to $100 million annually, potential cost savings of $45 million annually, and the unlocking of $400 million in real estate embedded in Emeritus through purchase options, the merger puts more money in the hands of both sets of shareholders regardless of whether it grows in the future. Good days lie ahead.
RAI CEO Susan Cameron came out of retirement
in May 2014 specifically to buy Lorillard, makers of Newport cigarettes, the top-selling menthol brand in America. The previous CEO tried to cut a deal but couldn’t. Cameron, whose industry relationships run deep, managed to pull the trigger on a $27 billion deal to buy Lorillard just 10 weeks back in the top spot.
In addition to Newport, Reynolds American gains Vuse, the e-cigarette brand it’s rolling out nationally. Although this is where the current growth is in the cigarette market, the U.S. legalizing marijuana federally at some point in the future provides huge potential for the company. When asked whether Reynolds would enter the pot market, Cameron stated, “If marijuana becomes legal on a national basis, we’d evaluate it.”
Those words alone make RAI worthy of consideration in 2015 and beyond.
There are five Canadian stock picks in RBC’s 30 global recommendations. The contrarian pick has to be Suncor given oil prices have taken it on the chin in 2014 and the company’s stock price seriously underperformed
compared to the S&P/TSX.
Warren Buffett owned 18.5 million shares
of Suncor stock as of the end of September. Unless the billionaire reports a significant reduction in his holdings at Berkshire Hathaway’s December year-end, in which case you might consider selling, there's a good chance oil prices move higher at some point in 2015 making Suncor a good bet.
Up until 2014, the media company’s stock’s done magnificently, outperforming
the S&P 500 on an annualized basis over the past five years by more than seventeen percentage points.
What went wrong in 2014? Nothing really.
While earnings weren’t anything to write home about and free cash flow was much lower year-over-year due to higher payments for sports programming such as its new Thursday NFL broadcast, it’s still a very solid company with lots of great content. Long-term it’s hard not to like CBS.