Market Call Tonight:
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John Zechner, Chairman, J. Zechner Associates
FOCUS: North American Large Caps
Market Outlook:
Most developed markets have rallied sharply over the past year but those gains were limited mostly to the defensive stock sectors. With global growth continuing (U.S. strong, Europe stabilizing, Japan potentially recovering and growth remaining in 7-8 percent range in China) cyclical and growth stocks are starting to join the rally. Stocks can continue to rise even if interest rates have bottomed as long as earnings keep growing. Risks of short-term correction have increased but we still expect stocks to be sharply higher over the next 2-3 years, helped by asset relocation from bond market. Overweight sectors in both the U.S. and Canada include basic materials, industrials, energy, technology and financials.
TOP PICKS:
Athabasca Oil Corporation (ATH TSX) Bought recently at $6.50
Stock valuation excessively low; light oil production alone could justify current price, meaning all the oil sand assets are effectively free. This includes contingent reserves of 10.6 billion barrels of oil at Dover, Hangingstone and Birch. The current Energy & Resources Conservation Board hearings on the Dover project has investors worried that the $1.3 billion put option with PetroChina on this project might be at risk.
Capstone Mining Corp. (CS TSX)
Copper prices are set to move higher on stronger global growth and supply disruptions. Capstone has levered up copper exposure with the recent purchase of Pinto Valley mine from BHP. The company now will have three producing assets (Minto, Cozamin and Pinto Valley), a development project (Santo Domingo) and trades at a significant discount to net asset value. The balance sheet is strong as well.
B2Gold Corp. (BTO TSX)
This former management team from Bema Gold has strong track record of acquisitions and mine operations in Central and South America. Gold production expected to double to 750-thousand ounces per year by 2017 with production costs below US$700 per ounce. Balance sheet is solid and stock trades at significant discount to net asset value; also under-valued on earnings and cash flow.
| Disclosure: | Personal | Family | Portfolio/Fund |
| ATC | N | N | Y |
| CS | N | N | Y |
| BTO | N | N | Y |
Past Picks: August 17, 2012
Martinrea International (MRE TSX)
| Then: $7.93 | Now: $10.04 | +26.61% | TR: +26.61% |
Calfrac Well Services (CFW TSX)
| Then: $25.40 | Now: $29.01 | +14.21% | TR: +17.62% |
HudBay Minerals (HBM TSX)
| Then: $8.65 | Now: $8.31 | -3.93% | TR: -1.93% |
Total Return Average: +14.10%
| Disclosure: | Personal | Family | Portfolio/Fund |
| MRE | N | N | Y |
| CFW | N | N | N |
| HBM | N | N | N |
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