Based in Canada, Gordon Pape is a leading expert on both US and Canadian stocks. In a preview of the year-ahead, the editor of Internet Wealth Builder highlights four stocks to watch in 2019.
Enbridge Inc. (ENB)
This widely held utility has been reporting decent numbers and the yield is up to 6.1%, but investors still aren't convinced. Complicating the outlook further, the company has run into political resistance in Minnesota over its plans to upgrade its line 3 pipeline, which had previously obtained approval from state regulators.
It also faces opposition from the new governor of Michigan over its proposal to replace the aging line that runs under the Straits of Mackinaw.
The company will probably raise its dividend by another 10% or so this year. Whether that will be enough to give the stock a boost is anyone's guess. But as things stand right now, this appears to be an undervalued company and unless the whole market melts down we could see the price back in the $50 range by year-end.
On a price-earnings basis, Apple was the most reasonably priced major tech stock. But that didn't stop the shares from falling after the company announced a big revenue shortfall in the fourth quarter.
Some commentators are now describing Apple as a spent force that has lost its technological lead and is faced with a deteriorating market for its number one product, the iPhone. Looking back, Microsoft (MSFT) was once described in the same way but managed to reposition itself and remains a potent force to this day. Don't bet against Apple doing the same.
Still, the company has to contend with several headwinds, not the least of which is the U.S.-China trade war which Apple CEO Tim Cook said is one of the main contributors to the revenue shortfall. On a p/e basis, the stock looks like good value.
This is Canada's largest petroleum company and its stock is a bellwether for the industry. The shares hit a high in Toronto of $55.47 in mid-2018 but have been trending down even since.
The stock needs a boost from energy stocks. If that happens (and it's a big if in the light of the energy forecast that follows), Suncor could move significantly higher over the next 12 months, potentially to the $48-$50 range.
Royal Bank (RY)
Just as Suncor is a proxy for the energy sector, Royal Bank is the leader among financials. As it goes, so goes the sector. Last year was a bad one for bank stocks, which came as a bit of a surprise as they usually prosper during periods of rising interest rates.
Concerns about a slowing economy hurting bank earnings plus on-going worries about the still overvalued housing markets in Toronto and Vancouver have contributed to pushing bank shares lower - perhaps too low.
Thanks to a recent dividend increase, RBC stock now yields almost 4.2%. That's a very attractive return from Canada's largest bank. According to Yahoo! Finance, analysts have a one-year estimate of $111.79 on the stock. That strikes me as a little optimistic, but it would not surprise me to see the shares flirting with $100 by year-end.
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