BNN's portfolio manager interviews are a great repository of investment ideas from across the asset management spectrum.
Today we feature Highwater Capital's Ara Nalbandian, whose Diversified Opportunities Fund is up 4.6% YTD (August 31, 2010), up 15.4% over 1 year, and up 17.3% annualized since December 2007. During the September 15, 2010 appearance, Nalbandian, discussed, among other things, his three 3 top picks for the coming period.
Nalbandian's first top pick is premium nutritional products manufacturer, Atrium Innovations (ATB-T 14.070). It was a previous top pick, Up 2.3%, since he spoke of it August 19, 2009. It's trading around 8X earnings and he says the company is well managed. Atrium had a couple of tough quarters due to weakness in the euro, but things have turned around. The company is targeting have 20% of the US market to grow its buisiness organically and via acquisition.
His next top pick is Bombardier Inc. B-shares (BBD.B-T 4.880) The Transportation division is doing well and they keep adding contract wins. Nalbandian expects "the catalyst will be from the aerospace side, specifically the C-series jet that is under development." The new jets are targeted to launch in 2013 and will be a significant driver of their free cash flow generation.
Nalbandian likes Microsoft (MSFT-Q 25.115) "Microsoft generates $20 billion in free cash flow this year and $23 billion next year," says Nalbandian. Its trading at a very low multiple and they are returning the free cash flow in the form of share buybacks and dividend increases.
Finally, Nalbandian issued a Don't Buy on BP, PLC ( BP-N 38.180) "Since the spill, stock has recovered significantly partially because of oil prices," he said. "However the situation will continue to have an overhang, as the company is selling off about $30 billion in assets to pay for their liability. Despite that, he added, the company's liablities "could go up to $45-billion in the case of gross negligence."
Report Card (One Year Later)
Merck & Company (MRK-N 36.510) Since Aug 19/09 the stock is UP 15.9%. It has merged with Schering-Plough and the combination produced a pipeline that is incomparable in the Pharma sector. Nalbandian sees they "will have sustainable growth for many years to come."
George Weston Ltd. (WN-T 79.620) (A Top Pick Aug 19/09. Up 41.4%.) Nalbandian said this is his way of being invested in Loblaws (L-T). Its Discount to NAV is now gone so he sold out of his position at about $72-$73 (25%) and moved into the George Weston Perpetual preferred shares, which he wrote about in a report late last month.
Data: Stockchase.com
