The Lato Letter: Volume 3, Issue 7.

The Lato Letter: Volume 3, Issue 7.

Thought I would share the notes with you that I provided to BNN for my appearance earlier today on Market Call. If you missed the show, you can retrieve it from the Library section of this website or on the BNN website.

Market Outlook

There is still enough healthy skepticism among investors to remain constructive on longer term – 2 to 3 years – market outlook. Valuations have risen but so have earnings. Seasonal factors may not be positive but that should not dictate remaining investments in solid, properly valued equities. Low yields on interest rate alternatives and the increased risk to investors’ capital in the longer term bond market further favour equities.

Top Picks

Gilead Sciences (GILD-NASDAQ)

Owned by clients only. Initiated position late April at $72.60, latest purchase couple of weeks ago at $81.79. The stock has a compelling valuation at less than 11 times 2015 earnings with outstanding pipeline providing strong earnings growth. Controversial new drug Sovaldi for Hepatitis C has huge potential as do several other products in their pipeline.

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Rogers Communications (RCI.B-TSX)

Owned by clients only. Initiated position several years ago around $36, latest purchase couple of weeks ago at $44.95. Company has underperformed the sector and the market over the last year or so but recent management changes could be the catalyst to get Rogers back on track. Also a play on the resurgence of the Blue Jays as attendance, merchandise sales, television ratings and ad revenues poised to increase.

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Tourmaline Oil (TOU-TSX)

Owned by clients, my wife and me. Initiated position just after the IPO at $21.25 in late 2010, latest purchase couple of weeks ago at $53.80. Arguably one of the best managed oil and gas companies in Canada, the stock has been in a trading range between $54 and all time high of $57.66 for the last several weeks. Valuation is above average for the sector but production and cash flow growth are well above average justifying the valuation and continued upside.

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This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change without notice.

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