Ryan Bushell’s Top Picks for November 12, 2024

Ryan Bushell, president and portfolio manager, Newhaven Asset Management

FOCUS: Canadian dividend stocks

Top Picks: BCE, Northland Power, Canadian Natural Resources

MARKET OUTLOOK:

Newhaven portfolios have performed admirably so far this year, despite our conservative positioning, following two lackluster years of performance. Even after the rise in long term interest rates recently, our portfolio holdings are hanging in much better than when 10-year U.S. Treasury rates were at similar levels last year. It seems that our thesis on growth in power demand being more important than transient interest rate moves has caught on and we have seen several of our top holdings register greater than 20 per cent upside moves so far this year.

For all the twists and turns, the U.S. election played out largely as was expected earlier in the year, however the red sweep has inflationary ramifications that the bond market seems to be picking up on. With rates on cash dropping again, inflation expectations rising again, and geopolitical uncertainty seemingly everywhere, we remain laser focused on owning tangible assets with steady cash flows and durable business models that can survive whatever is in the offing over the next four years and beyond.

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TOP PICKS:

BCE (BCE TSX)

BNN Bloomberg is owned by Bell Media, which is a division of BCE.

This has been a horrible stretch for BCE. We were very supportive of the MLSE sale but like many others quite surprised by the decision to acquire Ziply. However, the shares are now trading well below the level that Ontario Teachers’ Pension Plan (OTPP) offered for the company in 2008. The shares sport a greater than 10 per cent dividend yield and BCE remains asset rich with catalysts ahead if it wants to surface more value for shareholders. The best lesson I ever learned in this business was regarding the BCE situation in 2008 when the deal proposed by OTPP fell through. Over the next decade the company was rebuilt and re-energized by new management and more than doubled the dividend. We will see if history repeats, or at least rhymes.

Northland Power (NPI TSX)

The downturn in Northland Power seems overdone to us, especially following the downdraft in all renewable energy companies following the election. Northland has no exposure to the United States and several catalysts ahead including the possible sale of underperforming business units and first power at its Baltic power project in 2025. Brookfield recently purchased its first offshore wind assets from Orsted last month and Northland remains an attractive acquisition target. With a six per cent dividend yield, solid contracted growth ahead and valuable in place infrastructure we feel Northland has a bright path ahead after a difficult few years.

Canadian Natural Resources (CNQ TSX)

To be clear this is not a one year call on oil prices. Canadian Natural Resources is one of the best managed companies anywhere in the world in any sector. It has a pristine track record of shareholder focused execution that includes 20 plus years of consecutive dividend increases and a commitment to return 100 per cent of free cash to shareholders once target debt levels are achieved following their most recent acquisition of Chevron’s stake in AOSP last month. While CNQ’s shares are certainly not cheap at current levels, they still offer a 4.7 per cent dividend yield with a line of sight to steady growth ahead.

PAST PICKS: OCTOBER 6, 2023

TC Energy (TRP TSX) (Spinoff South Bow Corp 10/2/2024)

• Then: $41.65
• Now: $68.92
• Return: 65%
• Total Return: 77%

Fortis (FTS TSX)

• Then: $53.45
• Now: $61.80
• Return: 16%
• Total Return: 20%

Algonquin (AQN TSX)

• Then: $7.90
• Now: $6.75
• Return: -14%
• Total Return: -9%

Total Return Average: 29%