Bruce Tatters, founding partner and CIO at Triumph Asset Management

Focus: North American large caps
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MARKET OUTLOOK
The results of the recent U.S. election will be a game changer in global capital markets. We believe strongly that a unified Republican government will move decisively toward deregulation, lowering tax rates for both businesses and consumers, and placing an emphasis on revitalizing U.S. industries forgotten by Democrats. These policies will broadly stimulate both growth and employment in the U.S., strengthen the U.S. dollar, and move both short- and long-term interest rates higher. As the financial markets digest the implications of a Republican-controlled government, active money managers will enjoy a new enduring renaissance for their trade. It is our belief that U.S.-based financial, pharmaceutical, and other cyclical-related industries will benefit the most. The Canadian outlook looks much more balanced as improved growth in the U.S. will be offset by an Obama-like Liberal government in Canada moving us in the wrong direction.

TOP PICKS

BANK OF AMERICA (BAC.N)

• One of the largest lending institutions in the U.S. with a global presence.
• Key impediments to profit growth in U.S. banking industry — the zero-rate policy of the Federal Reserve (which impairs banks’ spread businesses) and stifling regulation — are about to be removed.
• Lending growth and fee grow in many areas of business to benefit from faster GDP growth in U.S.
• U.S. banking industry will get considerable tax relief from the current 30 per cent+ tax rates, which will significantly grow earnings, in addition.
• Although stock has had a significant run since the election, we believe that earnings will double over the next three years, as will the stock.

JET BLUE (JBLU.O)

• U.S. airline industry has gone through a transition from highly competitive industry to very profitable oligopoly in the recent years.
• Industry observers have been skeptical about the group’s profitability rolling over in 2017 and 2018, with which we do not agree
• Jet Blue, along with many of the U.S. carriers, still trade off historical valuation standards of 4x to 6x EV/EBITDA, which we believe will grow into the 7x level in the next couple of years.
• At 7x 2018 EV/EBITDA, we believe JET Blue will trade at $30 per share.

VALERO ENERGY (VLO.N)

• Valero is one of the most profitable national pure-play refiners and mid-stream oil service players in the U.S.
• U.S. refining industry, similar to the U.S. banking group, is another industry which has been plagued by overregulation.
• This RIN regulation has been significantly impacting profitability levels at VLO and other U.S. refiners.
• VLO currently trades at 11.8x 2017E EPS of $5.40, whereas with regulation change we could see VLO’s earning power rise to $6.00 per share.
• Our target is $80 or 13x EPS adjusted for legislation.
   

PAST PICKS: DECEMBER 10 2015

ALLERGAN (AGN.N)

• Then: $305.70
• Now: $190.63
• Return: -37.63%
• TR: -37.63%

SKYWORKS SOLUTIONS (SWKS.O)

• Then: $84.49
• Now: $78.81
• Return: -7.16%
• TR: -5.62%

WELLS FARGO (WFC.N)

• Then: $54.34
• Now: $52.28
• Return: -3.79%
• TR: -0.67%

TOTAL RETURN AVERAGE: -14.64%