Tuesday, June 27, 2006

UBS Canada Shuffles its Large-cap List

The Globe and Mail, Angela Barnes, 27 June 2006

UBS Securities Canada Inc. has added three stocks to its list of 12 recommended Canadian large-capitalization issues and dropped three. Canadian Natural Resources Ltd. and TransCanada Corp. were put on the list in the energy sector, replacing EnCana Corp. and Suncor Energy Inc., and Royal Bank of Canada joined the financials, replacing Canadian Imperial Bank of Commerce.

The other nine stocks on the list are Petro-Canada in the energy sector, Alcan Inc. and Goldcorp Inc. in materials, Bank of Nova Scotia, Sun Life Financial Inc. and Toronto-Dominion Bank in the financials and Canadian National Railway Co., Rogers Communications Inc. and Shoppers Drug Mart Corp. in the "other" category.

George Vasic, UBS Securities Canada strategist, said in a report that "the market's recent decline has changed the pecking order in some sectors, and so we are using the opportunity to rotate into some laggards."

Canadian Natural Resources has been the worst performer among the energy issues included in the S&P/TSX 60 issues so far this quarter. It is one of analyst Andrew Potter's top picks, has the highest projected return in his area of coverage as measured against his price target and is attractive for its oil sands exposure and potential for a new rating, Mr. Vasic said. TransCanada is analyst Andrew Kuske's top pick for its exposure to the Ontario power market. Moreover, it has had the poorest showing year to date among the TSX 60 energy issues, is defensive and yet still offers a potential return of 25 per cent if it reaches to the projected price target.

RBC has moved up in analyst Jason Bilodeau's ranking, "having both a more reasonable valuation and a platform that is running extremely well on multiple fronts," Mr. Vasic said.

The stocks included in the list of 12 have done considerably better than the TSX 60 itself -- with a cumulative gain of 52.9 per cent since inception in September, 2004, compared with the 36-per-cent advance for the TSX 60 over the same period.