Equity Ideas

On the Canadian economic front, CPI numbers were tame. Following yesterdays poor weekly jobless claims report and Philly Fed Manufacturing report in the US, stocks are continuing their sell-off today while bonds continue their amazing run. I have to admit, I didn't think long yields would move lower, but here we are with 10 year treasuries and Canada's below 3%. Investors are lowering their economic growth expectations and along with it, their appetite for risk.

Continuing on from yesterday's theme of cash rich companies with attractive yields, Credit Suisse has also produced a report indicating their top 24 US stock picks - Each has a market cap in excess of $15 billion, a yield of 2.75% or greater, and a beta of .75% or less versus the S&P500. As a basket the average yield is over 4% and the average P/E multiple is roughly thirteen times trailing earnings. If you'd like a copy of the report, ask us at yourlifeyourplan.ca or call 250-868-5525.

The other theme Credit Suisse highlighted this morning is the case for an increase in global M&A activity. In their analysis, pharma screens as the most attractive for M&A activity based on its leverage, earnings volatility, valuation, and spread between free cash flow and bond yields. Large cash stockpiles and low-to-negative sales growth estimates over the next four years might also accelerate the pace of acquisitions of early life-cycle biotechs by major pharma as they look to fill in product pipelines.

GB