Stephen Carlin- AEGON Capital Management Inc.

Manager favours U.S. stocks for superior earnings growth.

Michael Ryval 28 September, 2012 | 6:00PM
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Stephen Carlin believes that Canadian and U.S. equities are fairly valued, although the latter have better upside.

"The Canadian market is not cheap -- nor is it expensive," says Carlin, manager of the $234-million imaxx Canadian Fixed Pay and senior vice-president and head of equities at Toronto-based AEGON Capital Management Inc. "The S&P 500 Index can also be described as fair value. However, one of the key differences is that there is better earnings-growth potential in U.S. companies relative to those in Canada."

One reason for the divergence is that Canada has a high percentage of resource-based companies. "In light of the weaker global economic prospects, we've seen pressure on the profitability of companies in the energy and materials space," says Carlin. "A prime example of that are gold companies. For a given change in gold prices, you are not getting the same rate of change in earnings -- in fact, earnings have been deteriorating."

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Michael Ryval

Michael Ryval  Michael Ryval, a regular contributor to Morningstar, is a Toronto-based freelance writer who specializes in business and investing.

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