Rebecca Teltscher

Click here to see Ryan Bushell on BNN Market Call on Thursday October 2, 2014.

With regards to the recent correction in the Canadian market, Ryan believes the fundamentals are still intact. Economic numbers in the US, which is leading the world out of the global recession, are still strong. He recently did a small rebalance by taking money off the table in industries that have had great runs such as infrastructure and banks and redeployed in commodity producers that are now providing larger yields. Ryan mentioned that commodity prices are extremely weak which is mostly related to US dollar strength. However, with the strength in the US economy, we should be seeing stronger commodity prices, therefore there is a dislocation in the market that can potentially provide buying opportunities.

In terms of Leon Frazer’s strategy, Ryan says that staying invested with securities that allow you to stay in the market and not worrying about short term turmoil is key. It is important to choose companies with lower volatility, a sustainable business model and a sustainable dividend.

With regards to Ryan’s past picks from September 23, 2013, Potash Corp (total return 18.77%) may display some short term choppiness from the commodity price, however, the long term outlook for this company still remains positive as their capex profile comes off to where sustaining capex is much lower than revenues and free cash flows remain strong. Crescent Point (total return 8.72%) continues to show good discipline and a focus on the long term. They accumulate assets in areas where they are already located and they continue to hedge production. Collecting a 7% yield offsets any price movements in the short term. And finally, Enbridge (total return 24.59%) continues to be a long term holding at Leon Frazer. Since owning the original IPO in 1952, some Leon Frazer clients are now looking at over 60 years of compounding at approximately 10% total return ever year. They have a sustainable business model and their growth profile is looking better than ever.

For his current picks, Ryan chose Scotiabank which he believes is a top tier Canadian bank in terms of their business model. They have the second highest yield and there is an opportunity to take advantage of their relative weakness compared to the other banks. Freehold Royalties can take advantage of the hype from the Prairiesky IPO and pick up more assets in the market place. Although they are unhedged on commodity exposure, they have very low capital expenditures that they can generate revenue on. And finally, Cenovus Energy has been an underperformer over the past few years even though they have doubled production since they were spunout in 2009. Ryan believes the company is going in the right direction but the stock price hasn’t moved which creates buying opportunities for the long term.

For the full video replay, please click here.

Ryan

 

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