Market Insights

Top consumer discretionary stock picks

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Lorne Zeiler, VP, Portfolio Manager and Wealth Advisor at TriDelta Financial, was recently invited by the Globe and Mail to provide top stock picks in the consumer discretionary sector.

Special to The Globe and Mail, Published Tuesday, May 10, 2016

16413399_sConsumer discretionary stocks can capture the momentum of an improving economy. In good times, money flows into this sector as retailers, media companies and automotive manufacturers benefit from increased spending by consumers with more disposable income. In turn, investors are rewarded with rising share prices and dividends. Yet during a more uncertain economic environment – such as the one we are in now – the sector can be tricky to navigate, so we asked three investment professionals for their top picks.

Lorne Zeiler, portfolio manager with TriDelta Financial in Toronto

  • L Brands Inc. (LB-N)
  • Last close: $70.03 (U.S.)
  • Dividend yield: 3.43 per cent

Based in Columbus, Ohio, this retailer owns Victoria’s Secret and Bath and Body Works – two chains with global reach and leaders in their respective retail categories. “Both brands have strong customer loyalty, providing the company with pricing power and ability to maintain its strong margins,” Mr. Zeiler says. Benefiting from an improving environment in the United States, the company is also expanding rapidly into emerging markets, building its revenue overseas while increasing efficiencies in existing stores in North America and Europe to improve margins. Also of note, L Brands has “a history of dividend growth and trades at a reasonable valuation to its peers,” he says.

  • Tupperware Brands Corp. (TUP-N)
  • Last close: $55.49 (U.S.)
  • Dividend yield: 4.90 per cent

The world’s largest direct seller of plastic storage containers and cosmetics, the company has consistently strong sales in mature markets such as North America and Europe. Where the company’s real growth lies, however, is in emerging markets such as China, Brazil, Argentina and South Africa. “Tupperware offers a high dividend for yield-hungry investors and trades at an attractive multiple of less than 14 times forecasted earnings,” Mr. Zeiler says. A strong U.S. dollar did negatively affect earnings in 2015 because of Tupperware’s exposure to foreign markets where, despite increased sales, revenue was lower when converted back to dollars. “This headwind may now be a positive as Tupperware recently increased its earnings per share estimate for 2016 by 5 per cent solely based on the decline in the U.S. dollar.”

Here is the link to the original Globe & Mail article.

Lorne Zeiler
Written By:
Lorne Zeiler, MBA, CFA
VP, Wealth Advisor
lorne@tridelta.ca
416-733-3292 x225

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