Top picks from Mike Vinokur, portfolio manager at MV Wealth Partners with iA Private Wealth
FOCUS: North American Large Caps
Top Picks: Cigna, Rogers, Corebridge Financial
MARKET OUTLOOK:
We are approaching equity markets with caution. We feel that market participants are perhaps overly optimistic, and markets have been climbing the wall of worry well—perhaps a little too well. We are quite concerned about recent signals from the bond market, given that U.S. Treasury yields have been rising sharply. The largest sovereign market in the world is struggling to attract buyers.
The 10-year Treasury yield has increased from 3.65 per cent in mid-September to the current 4.28 per cent. This significant move in just six weeks is somewhat reminiscent of the action we saw last year at the end of October when the 10-year Treasury yield hit five per cent. Generally, high volatility in the Treasury market could be a harbinger of things to come in equity markets.
On the surface, everything seems to be going well based on the latest strong gross domestic product (GDP) readings, job numbers, and credit availability. However, we are concerned that some of the leading economic indicators we follow do not necessarily corroborate the strength of the economy to continue. If not for the very strong deficit spending, we might already be in a slowdown/recession. We predict that analysts may begin to reduce their earnings estimates for next year and targets on the S&P 500, which we view as too lofty in some cases.
Therefore, we believe it may be time to reduce risk. We have been raising cash lately, expecting a correction of five per cent to 10 per cent, and should it occur, it would increase our margin of safety to redeploy capital and provide a “reset” to markets.
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TOP PICKS:
CIGNA (CI NYSE)
Cigna is one of the largest HMOs in the US. It is extremely well run and has very strong record of earnings growth. In the past 10 years it has compounded its earnings by more than 13 per cent per year rising from $7.29 per share to $25 in 2023, while repurchasing 25 per cent of the shares since 2018. Through acquisitions, cost containment and share repurchases, management has shown to be excellent stewards of capital.
Rogers Communication (RCI.B TSX)
Rogers recently reported and reiterated that it would deliver $3 billion in free cash flow. It is now trading at less than 10 times free cash flow with a dividend yield of close to four per cent. It has recently announced a deal to reduce leverage and guided to very good revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) growth of eight per cent to 10 per cent and 12 per cent to 15 per cent respectively. We would like to think that 2025 will bring either a dividend bump, share buybacks or a bit of both.
Corebridge Financial (CRBG NYSE)
This is a newer insurance company spun out of AIG in 2022. CRBG provides retirement solutions, and insurance products. We believe the company has earnings power of $5 per share. At $32 with you are paying just over six times earnings for a business that generates robust returns on capital and has the ability to repurchase close to 10 per cent of its shares yearly. The stock currently yields close to three per cent.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CI NYSE | N | Y | Y |
| RCU.B TSX | N | Y | Y |
| CRBG NYSE | N | Y | Y |
PAST PICKS: November 28, 2023
CVS Health (CVS NYSE)
- Then: $69.32
- Now: $57.36
- Return: -17%
- Total Return: -13%
ONEX (ONEX TSX)
- Then: $90.32
- Now: $98.81
- Return: 9%
- Total Return: 10%
Manulife Financial (MFC TSX)
- Then: $26.22
- Now: $42.01
- Return: 60%
- Total Return: 65%
Total Return Average: 21%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CVS NYSE | N | Y | Y |
| ONEX TSX | Y | N | Y |
| MFC TSX | N | Y | Y |