During the dog days of summer in a most unusual year (with a U.S. election to boot), it’s fair to say that many of the rules and tools of investing (i.e. seasonality) are out the window. Today, where having a look at the Top 4 BNN Stock Picks one can consider buying this summer.
The only certainties are that stocks surge whenever there’s positive news about a COVID-19 vaccine or treatment (i.e. Moderna) or whenever a government announcing more stimulus; and that stocks plunge on U.S.-China tensions or bad virus news (more cases in the U.S., the world’s hotspot).
Tech stocks continue to lead the way
Tech stocks continue to lead this summer, but last week saw significant sell-offs in semis and even Microsoft.
Given this, there’s no theme to my picks this week, just some investing ideas to consider, from the defensive Canadian Stock picks to the speculative Open Text stock or AbbVie stock. Backed by BNN Stock Picks opinions, as always! :
BNN Stock Picks #1: The FORTIS Stock (FTS-T)
The Fortis stock is one of our Canadian Stock Picks. For income investors and for defence, this utility (which serves Canada, the U.S. as well as the Caribbean) offers a certain 3.63% dividend yield and trades at a PE of just over 14x. I say certain, because Fortis has no exposure to commodity prices and has raised its divvy for 46 straight years.
They’re also protected from the whims of the wider market from predicable cash flow trickling from its regulated contracts. To paraphrase analyst Greg Newman, as long as government money flows, the lights will stay on. Year-to-date, Fortis outpaces the TSX 1.7% to -5.5%, and its price target hasn’t budged since the pandemic hit, staying around $59, which currently translates into 11% upside.
Buy Fortis stock and sleep well. More cautious investors like Brian Acker may want to wait for a pullback to say book value at $43.
BNN Stock Picks #2: The OPEN TEXT Stock (OTEX-T)
For growth, this Canadian IT stock deserves a look. The Open Text stock has been overshadowed by mega-grower, Shopify, and the American tech titans.
Year-to-date, OTX has risen over 4%. Not bad, but tech stock specialist Kim Bolton sees opportunity for it to grow within the red-hot cloud computing space.
True, OTX trades at a PE of 43x, though that’s nothing compared to Shopify and Lightspeed POS.
OTX’s dividend stands at 1.59%, which is significant for a tech stock, but clearly not enough to attract income investors. Open Text does have two things going for it: a consistent track record in acquisitions and in synergizing those businesses, plus the continuing work-from-hometrend. Further, more than 90% of its revenues come from the U.S., which is reopening slower than Canada, given the high number of COVID cases.
Three months ago, OTX announced a partnership with Amazon’s industry-leading cloud services. Brian Madden notes that three-quarters of OTX’s revenues are recurring, which lets investors sleep at night. Analyst Bolton is waiting for a pullback to the low-$30s, though he may have to wait, since the stock is flirting with $60. Then again, the opportunity may arise when OTX reports its Q4 and 2020 yearly on August 6.
BNN Stock Picks #3: The AbbVie Stock (ABBV-N)
The good thing about this drugmaker is that its arthritis drug, Humira, has been a runaway success, making up 63% of company revenues. The problem with AbbVie is also Humira–it loses patent protection in American in 2023.
Rivals are already chomping at the bit. To counter this, AbbVie inked a deal with Genmab in early June to develop anti-cancer meds. At the same time, AbbVie announced it was entering the COVID-19 vaccine/treatment race with three partners, including Utrecht University which discovered a potentially effective antibody.
Meanwhile, AbbVie is wrapping up its US$63 billion purchase of Botox-maker, Allergan. AbbVie is doing all the right things. All these moves reduce the company’s dependence on Humira.
The AbbVie stock trades at 17x earnings and pays a robust 4.8% dividend. AstraZeneca may be grabbing more headlines, but AbbVie has outperformed its vaccine rival 19% to 12% in the last three months. Also, AbbVie has delivered an earnings surprise of 2.77% in the last four quarters. AbbVie next reports before the opening bell on July 31.
BNN Stock Picks #4: iShares S&P/TSX Global Gold ETF (XGD-T)
Lastly, as I write, the price of gold is hitting new all-time highs. For those late to join the gold party and don’t know whether to buy Newmont, Barrick, Kirkland Lake or Franco-Nevada, this ETF includes all of them and then some.
XGD charges a 0.55% MER. As long the U.S. dollar keeps falling, pressured by ongoing COVID cases, gold will remain strong.