BNN Market Call Tonight - Top Picks (Aug. 29, 2014)
Parkland Fuel, Onex, Varian Medical
Parkland Fuel (tsx: PKI) is a fuel distributor with retail, commercial and wholesale distribution in Canada and the U.S. The company is in its first year operating without exposure to refining margins, which had historically caused earnings volatility. The company has worked to replace the refining margins with higher volumes, purchased through acquisitions. We believe the combination of ongoing consolidation and a more stable earnings stream will drive shares higher.
Onex (tsx: OCX) is a private equity firm. Strong markets have enabled the company to collect performance fees as it sells investments it made in the past. While this is good, the stock has sold off on concerns over how the company will spend the money it has raised, as 50% of its balance sheet will be in cash. We see this as a buying opportunity as their history of making very good investments suggests they will be able to meet their goal of growing Net Asset Value by 15% per year over time.
Varian Medical (us: VAR) makes sophisticated radiation-therapy equipment used in the treatment of cancer. The company has seen sluggish growth as predominantly U.S. buyers remain cautious on making big ticket purchases. We ultimately believe the demand for equipment from growing cancer rates globally will cause growth in purchases to resume, which would act as a positive catalyst for the shares.