Michael Sprung, president, Sprung Investment Management 
FOCUS: Canadian large cap stocks 


MARKET OUTLOOK:

As 2021 comes to a close, markets are becoming choppy as investors contemplate some of the risks that are pervading market sentiment following a year in which the trend has been decidedly bullish. 

Pandemic conditions continue to restrict civil liberties as new variants appear and caseloads rise in yet another wave. The latest variant, Omicron, appears to be spreading at a faster pace than its predecessors and its resilience to the current vaccines is still being determined. 

The disruption to the economy resulting from the response to the pandemic has caused severe strains on global supply chains. Over the past few decades, supply chains have adjusted to cater to a more globalized, just-in-time process, that does not work in a world of restricted borders. 

It will take some time for supply chains to reorganize the logistical issues of providing goods and services, particularly if a greater level of national security is desired. These disruptions are most apparent in the resurgence of inflationary concerns exacerbated by shortages in both goods and labour. Central banks at first postulated that these inflationary pressures would be temporary and dissipate as a recovery quickly ensued, but doubts about the speed of any recovery are now taking hold.

Valuations have become stretched during as markets have advanced. 2022 may well prove to be a more challenging year and markets may be much more volatile.


TOP PICKS:

Michael Sprung's Top Picks

Michael Sprung, president of Sprung Investment Management, discusses his top picks: Cascades, CAE Inc., and NFI Group.

Cascades (CAS TSX)
Last bought in June 2021 at $14.45 
Cascades is a manufacturer of tissue and paperboard packaging with more than 90 facilities in Canada, the U.S. and Europe. Over the last number of years, Cascades has been paring its diverse portfolio and has recently sold its European boxboard operations to Apollo Global. Going forward, it is expected that the focus will be on tissue and containerboard. The balance sheet has been improving, which should lead to further returns to shareholders through dividend increases and/or share buybacks. The valuation is very attractive and the current yield is around 3.5 per cent.


CAE Inc (CAE TSX)
Last bought in March 2016 at $15.00 
CAE is a world leader in the design and production of flight simulation systems used in commercial and military applications. The Company also provides training services to civil and military customers globally. Civil aviation will benefit as air traffic recovers from depressed pandemic levels. Training services outsourced by airlines will also accelerate growth going forward. Military services are likely to increase as well due to the current growing geopolitical tensions. Margins and free cash flow are expected to increase over the next few years. 


NFI Group (NFI TSX)
Last bought in March 2021 at $27.15 
NFI Group is North America's leading manufacturer of transit buses and motor coaches and a distributor of aftermarket parts. In the UK, the Alexander Davis division is a leading manufacturer of double- and single-deck buses to the UK, Hong Kong and Europe. Pandemic conditions have affected operations and supply chain issues. NFI's balance sheet has improved significantly with the issue of $300 million in convertible debentures and $150 million in common shares at $24.55. Government announcements affecting transit funding will be a positive catalyst for NFI. Increasing volumes over the next few years will propel earnings growth. At current levels the stock is yielding 4.1 per cent.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
 CAS TSX N N Y
CAE TSX Y N Y
NFI TSX Y N Y

 

PAST PICKS: December 4, 2020

Michael Sprung's Past Picks

Michael Sprung, president of Sprung Investment Management, discusses his past picks: Bank of Nova Scotia, Suncor Energy, and Enbridge.

Bank of Nova Scotia (BNS TSX) 

  • Then: $67.50
  • Now: $85.46
  • Return: 27%
  • Total Return: 32%

Suncor Energy (SU TSX) 

  • Then: $22.95
  • Now: $31.33
  • Return: 37%
  • Total Return: 41%

Enbridge (ENB TSX) 

  • Then: $42.64
  • Now: $48.71
  • Return: 14%
  • Total Return: 22%

Total Return Average: 32%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
BNS TSX  Y N Y
SU TSX Y N Y
ENB TSX Y N Y