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Global Trio: Cars, Food, and Banks

10/28/2014 10:00 am EST


Keith Richards

Portfolio Manager, ValueTrend Wealth Management and Worldsource Securities Inc.

Keith Richards, of Value Trend/Wealth Management, is a regular contributor of Investor's Digest of Canada; here, he reviews a trio of recent buys for those who want to start bargain hunting.

One stock we recently bought was Tata Motors Ltd. (TTM), India’s leading builder of cars, trucks, and buses.

We view Tata as a play on the future, given our expectation that an improvement in India’s car and truck industry will boost the company’s profit margins, as well as make it easier for Tata to roll out new models.

Believe it or not, more of us are buying both Jaguars and Land Rovers—an important growth driver for Tata—given that both cars are made by a Tata subsidiary. After Tata recently pulled back on a strong breakout, we decided to buy.

We also recently bought YUM! Brands (YUM), the global fast-food giant, home to such iconic brands as Pizza Hut, KFC, and Taco Bell.

YUM is now focusing on emerging markets, where growth potential is significant. In mid-September, for example, it opened its first Pizza Hut in Africa—in this case, in Johannesburg—South Africa’s financial hub.

We also see the company going great guns in China where it already has over 1,260 Pizza Hut restaurants, as well as more than 4,560 KFC outlets. And that excludes Hong Kong.

YUM recently hit its support line after it announced it had problems with a supplier, although the problems have now been fixed.

In the meantime, YUM is showing excellent support at current levels, so much so that we view it as a turnaround play over the near-term.

A strong rebound off its trend line followed by a continuation of the uptrend should result in positive upside for the company.

Another one of our recent buys was BMO’s S&P/TSX Equal Weight Banks Index (TSX: ZEB), an exchange-traded fund that’s restricted to equal amounts of Canada’s big-six banks.

Those six names are the National Bank of Canada (TSX: NA), the Toronto Dominion Bank (TSX: TD), the Bank of Nova Scotia (TSX: BNS), the Royal Bank of Canada (TSX: RY), the Canadian Imperial Bank of Commerce (TSX: CM) and, of course, the Bank of Montreal (TSX: BMO).

If seasonal trading patterns are any indication, Canada’s banking sector is expected to outperform the S&P/TSX Composite between October and the spring of 2015.

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