UBS picks its top Canadian stocksUBS Securities Canada has compiled a list of 12 Canadian stocks its analysts consider the “cream of the crop,” representing leaders in their sectors and most likely to outperform through the next 12 months.
“In an environment fraught with uncertainty, we believe these large-cap, liquid stocks are high-quality franchises that will show the way relative to their sector peers and, by extension, as a group relative to the market,” said UBS chief Canadian strategist George Vasic and research associate Dan Brennand in a note to clients.
The 12 stocks picked to lead their respective sectors are Alcan Inc., ATI Technologies Inc., BCE Inc., Brascan Corp., Canadian National Railway Co., Canadian Imperial Bank of Canada, EnCana Corp., Magna International Inc., Placer Dome Inc., Shoppers Drug Mart Corp., Sun Life Financial Inc. and TransCanada Corp.
The number of stocks picked to represent each sector is roughly proportionate to the sectors' overall weighting on the TSX, so investors can use this basket as a proxy for a neutrally-weighted portfolio, UBS said.
The top energy pick, EnCana, stands to benefit from its significant production of natural gas production and also boasts a large undeveloped resource base and operating costs are down from a year ago.
Placer Dome got the nod for its exposure to gold and copper, two commodities which UBS says has a positive outlook. It sees copper peaking in the final quarter of this year at $1.34 (U.S.) a pound and gold reaching $470 an ounce in the first quarter of next year.
ATI Technologies will continue to gain momentum through next year, UBS said, with strong products in the personal computer and consumer markets, while the company is expected to continue to benefit from growth of the notebook market in the second half of this year. Gross margins will be about 35 per cent through next year and similar in 2006, UBS said.