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Goldcorp (TSX: G)
Mining
When gold prices topped US$1,000 in February, they didn’t stay there long, but it did serve investors notice that gold’s role as a safe haven in turbulent times is still intact. Canada, of course, is home to some of the world’s largest gold companies in Barrick (TSX: ABX), Goldcorp and Kinross (TSX: K), all of which are in a good position to survive 2009.
Top marks go to Goldcorp, says Richard Gray, precious metals analyst at Blackmont Capital. Goldcorp has no debt, no hedges, and Gray calls it the go-to name in the sector because of its longer-term growth profile, low costs, solid balance sheet and the low political risk profile of its asset base. Indeed, 70% of its net asset value comes from North American mines.
Goldcorp produced 2.3 million ounces of gold last year at a cost of US$306 per ounce. By 2013, it expects to produce 3.5 million ounces at US$300 per ounce. The compounded annual production growth rate of 8.8% is the highest among the senior gold producers, says Gray, and it is driven by two main projects, Peñasquito in Mexico and Pueblo Viejo in the Dominican Republic.
Gray also notes that Goldcorp’s balance sheet, which at the end of 2008 boasted US$262 million in cash and no debt, provides the financial flexibility necessary to take advantage of any opportunities that may come its way.
SNC-Lavalin (TSX: SNC)
Infrastructure
With governments around the world pumping billions into their respective economies, there’s one sector that’s an obvious winner: infrastructure. That puts Canada’s largest and highest-profile engineering design firm, SNC-Lavalin, in a pretty good spot. “It’s the Canadian champion internationally in the space,” says Ian Nakamoto, head of research at MacDougall, MacDougall & MacTier.
Corey Hammill, an analyst at Paradigm Capital, noted in a January report that SNC is well-positioned to take advantage of a worldwide infrastructure debt that will cost billions to address. China alone has a stimulus plan worth approximately US$600 billion, featuring a significant infrastructure component.
SNC has a healthy balance sheet — about $800 million in cash and roughly $100 million in unsecured debt — and a track record of increasing its dividend by more than 20% in each of the past five years. It’s also been in business for 100 years, giving it plenty of experience at taking on often complex core infrastructure projects in more than 100 countries.
Although there might be some exposure to risk because of the high spending levels required on these large-scale projects, Hammill counters that many governments have little or no choice but to spend money on them. And while half of SNC’s contracts are sealed at a fixed price, which carries the risk of cost overruns, Hammill notes that SNC has a good record of delivering projects on time and on budget.
EnCana (TSX: ECA)
Oil and gas
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