Opinions by Paul Harris, CFA | StockChase
2491
Paul Harris, CFA

Portfolio Manager and Partner

ON STOCKCHASE SINCE Feb 2004

Avenue Investment Management

2491
Paul Harris, CFA

Portfolio Manager and Partner

ON STOCKCHASE SINCE Feb 2004

Avenue Investment Management


Opinions by Paul Harris, CFA


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General Market Comment 

November 2, 2017

Global Economy- We are seeing very strong positive numbers from the global economy. For the first time in a long time, we are seeing a kind of global growth, partly as a result of Quantitative Easing. We are effectively going into a quantitative tightening, where they are pulling back on quantitative easing by buying less debt. The caveat is that global growth is not 4%-5%, so rates can’t be increased aggressively. We'll perhaps see slow increases in rates, but now it is more about what the picture looks like. We've had 2% growth, but as well as an increase in deficit. That is unusual. A tax cut is probably going to increase the deficit. From an investment point of view, you'll have low rates and low inflation, which probably means it is pretty good for the stock and bond markets. Globally, we are seeing some good earnings numbers. They’ve been fantastic for the last couple of quarters.

Global Economy- We are seeing very strong positive numbers from the global economy. For the first time in a long time, we are seeing a kind of global growth, partly as a result of Quantitative Easing. We are effectively going into a quantitative tightening, where they are pulling back on quantitative easing by buying less debt. The caveat is that global growth is not 4%-5%, so rates can’t be increased aggressively. We'll perhaps see slow increases in rates, but now it is more about what the picture looks like. We've had 2% growth, but as well as an increase in deficit. That is unusual. A tax cut is probably going to increase the deficit. From an investment point of view, you'll have low rates and low inflation, which probably means it is pretty good for the stock and bond markets. Globally, we are seeing some good earnings numbers. They’ve been fantastic for the last couple of quarters.

Unknown
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$0.020
Owned Owned
_N/A

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COMMENT
Apple(AAPL-Q) 

November 2, 2017

Earnings came out today and were pretty incredible. They beat on every basic number. Not an expensive stock, trading at 15X earnings. If the tax deal goes through, they get the upside on bringing back a bunch of money. Has a very strong ecosystem, so people tend to stay with them.

electrical/electronic

Earnings came out today and were pretty incredible. They beat on every basic number. Not an expensive stock, trading at 15X earnings. If the tax deal goes through, they get the upside on bringing back a bunch of money. Has a very strong ecosystem, so people tend to stay with them.

electrical/electronic
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$168.110
Owned Owned
Yes

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PAST TOP PICK
AutoCanada Inc.(ACQ-T) 

November 2, 2017

(A Top Pick Nov 29/16. Up 16%.) He still likes this very much. They purchase auto dealerships around Canada. New management has come in and are diversifying out of Alberta and BC. He can see the stock going much higher from here.

specialty stores

(A Top Pick Nov 29/16. Up 16%.) He still likes this very much. They purchase auto dealerships around Canada. New management has come in and are diversifying out of Alberta and BC. He can see the stock going much higher from here.

specialty stores
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$23.000
Owned Owned
Yes

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COMMENT
Amgen Inc.(AMGN-Q) 

November 2, 2017

Pharmaceutical stocks have had a much more difficult time because of the presidential election, a time when they usually fall. However, they've bounced back as much as they normally do. This is not expensive. Trading at about 14X earnings and pays a nice dividend yield. Has some really great drugs in their pipeline. It continues to outperform on an earnings basis. He really likes this.

biotechnology/pharmaceutical

Pharmaceutical stocks have had a much more difficult time because of the presidential election, a time when they usually fall. However, they've bounced back as much as they normally do. This is not expensive. Trading at about 14X earnings and pays a nice dividend yield. Has some really great drugs in their pipeline. It continues to outperform on an earnings basis. He really likes this.

biotechnology/pharmaceutical
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$172.410
Owned Owned
Yes

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TOP PICK
Bank of America(BAC-N) 

November 2, 2017

A great story. Trading at 12X earnings. Thinks Book is going to be around 26 this year, a little bit above BV. The issue is very simple. They've cut costs, gotten rid of businesses in parts of the world they didn't want to be in, and are between #1 and #4 in investment banking. Trading at 1.1X Book, and feels it should trade at 1.5X. Expects a massive amount of cost cutting in the banks over the next 5-10 years, because technology is really catching up to the banking industry. Dividend yield of 1.7%. (Analysts' price target is $29.)

banks

A great story. Trading at 12X earnings. Thinks Book is going to be around 26 this year, a little bit above BV. The issue is very simple. They've cut costs, gotten rid of businesses in parts of the world they didn't want to be in, and are between #1 and #4 in investment banking. Trading at 1.1X Book, and feels it should trade at 1.5X. Expects a massive amount of cost cutting in the banks over the next 5-10 years, because technology is really catching up to the banking industry. Dividend yield of 1.7%. (Analysts' price target is $29.)

banks
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$27.870
Owned Owned
Yes

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COMMENT
BCE Inc.(BCE-T) 

November 2, 2017

Sell and move into AT&T (T-N)? Doesn't think this is fully priced. AT&T is a similar company, but trading at a much lower multiple. It has a nice dividend yield. Doesn't see a lot of top line growth coming into these companies. You continue to get a nice dividend, and maybe 2%-4% top line growth. Like BCE, they can probably continue to cut costs, grow their business, and give you a decent rate of return. Expects they will give you 8%-12% rates of return. AT&T's Dividend yield is 5.8%.

telephone utilities

Sell and move into AT&T (T-N)? Doesn't think this is fully priced. AT&T is a similar company, but trading at a much lower multiple. It has a nice dividend yield. Doesn't see a lot of top line growth coming into these companies. You continue to get a nice dividend, and maybe 2%-4% top line growth. Like BCE, they can probably continue to cut costs, grow their business, and give you a decent rate of return. Expects they will give you 8%-12% rates of return. AT&T's Dividend yield is 5.8%.

telephone utilities
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$60.470
Owned Owned
Unknown

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COMMENT
Blackstone Group LP(BX-N) 

November 2, 2017

He still owns this and likes it. It isn’t trading at a very high multiple, about 10X earnings. The tax structure of these companies is kind of weird. Not many people in the US can own them effectively. If tax rates actually fall, they may actually become corporations as opposed to the present structure. This company has been very astute at gathering assets. They have well over $100 billion that they can put to work. Unlike Canada, many US pension funds don't have the ability to actually do private equities. Great dividend yield which he thinks goes up over the next little while. 8.3% dividend yield.

investment companies/funds

He still owns this and likes it. It isn’t trading at a very high multiple, about 10X earnings. The tax structure of these companies is kind of weird. Not many people in the US can own them effectively. If tax rates actually fall, they may actually become corporations as opposed to the present structure. This company has been very astute at gathering assets. They have well over $100 billion that they can put to work. Unlike Canada, many US pension funds don't have the ability to actually do private equities. Great dividend yield which he thinks goes up over the next little while. 8.3% dividend yield.

investment companies/funds
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$32.510
Owned Owned
Yes

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COMMENT

Probably paid too much for the US acquisition, but had no choice in order to compete with other Canadian banks. This is not expensive and pays a nice dividend. They have a relatively good Canadian franchise. If you see any slippage in this bank, it will probably come from the US acquisition side. Dividend yield of 4.6%.

banks

Probably paid too much for the US acquisition, but had no choice in order to compete with other Canadian banks. This is not expensive and pays a nice dividend. They have a relatively good Canadian franchise. If you see any slippage in this bank, it will probably come from the US acquisition side. Dividend yield of 4.6%.

banks
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$113.720
Owned Owned
Unknown

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TOP PICK
Cenovus Energy(CVE-T) 

November 2, 2017

A restructuring story, so will take some time. Has a new CEO coming in and will be cutting costs. Still has very good production. Expects the company to tick along. (Analysts' price target is $14.50.)

oil/gas

A restructuring story, so will take some time. Has a new CEO coming in and will be cutting costs. Still has very good production. Expects the company to tick along. (Analysts' price target is $14.50.)

oil/gas
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$13.360
Owned Owned
Yes

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BUY
CVS Health Corp(CVS-N) 

November 2, 2017

There are a couple things going on. A lot of generics are hurting the stock, and same-store sales have been very difficult over the last while. Amazon (AMZ-Q) supposedly moving in on pharmaceuticals has been hurting. The talk of doing a merger with Aetna would create a fair bit of dilution, and people are worried about that. He would be a buyer. Retail over the long-term is a very strong business.

specialty stores

There are a couple things going on. A lot of generics are hurting the stock, and same-store sales have been very difficult over the last while. Amazon (AMZ-Q) supposedly moving in on pharmaceuticals has been hurting. The talk of doing a merger with Aetna would create a fair bit of dilution, and people are worried about that. He would be a buyer. Retail over the long-term is a very strong business.

specialty stores
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$69.380
Owned Owned
Yes

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DON'T BUY
Deutsche Bank AG(DB-N) 

November 2, 2017

He wouldn't buy this. There are so many other banks you could buy that are in much better shape. The difficult thing is that they don't know what they want to be. They had a massive investment banking franchise. He would suggest looking at Bank Santander (SAN-N), a good retail bank and a good wealth management company in Europe with a huge franchise in Latin America.

banks

He wouldn't buy this. There are so many other banks you could buy that are in much better shape. The difficult thing is that they don't know what they want to be. They had a massive investment banking franchise. He would suggest looking at Bank Santander (SAN-N), a good retail bank and a good wealth management company in Europe with a huge franchise in Latin America.

banks
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$17.060
Owned Owned
Unknown

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COMMENT
Enbridge(ENB-T) 

November 2, 2017

A great company. Numbers came out yesterday, and were a little light compared to what the Street was expecting, so the stock dropped. Made a large acquisition, which is a bad one, and it has to be integrated. That is straining the company a little. Management is very strong and have executed very well. They are good at buying assets cheaply and integrating them.

oil/gas pipelines

A great company. Numbers came out yesterday, and were a little light compared to what the Street was expecting, so the stock dropped. Made a large acquisition, which is a bad one, and it has to be integrated. That is straining the company a little. Management is very strong and have executed very well. They are good at buying assets cheaply and integrating them.

oil/gas pipelines
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$47.030
Owned Owned
Yes

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COMMENT
General Electric(GE-N) 

November 2, 2017

Had never liked this because GE Capital masked a lot of the other returns, so the stock used to trade at a huge multiple because of their so-called stable earnings. It was a massive finance company that could manipulate the earnings. In 2008, it became unstable. They have a new CEO who has to 1) take a lot of costs out, 2) sell a lot of businesses and 3) cut the dividend. They’ll be having their investor day very soon, and thinks they should cut the dividend. Probably a great buy between $15 and $20.

electrical/electronic

Had never liked this because GE Capital masked a lot of the other returns, so the stock used to trade at a huge multiple because of their so-called stable earnings. It was a massive finance company that could manipulate the earnings. In 2008, it became unstable. They have a new CEO who has to 1) take a lot of costs out, 2) sell a lot of businesses and 3) cut the dividend. They’ll be having their investor day very soon, and thinks they should cut the dividend. Probably a great buy between $15 and $20.

electrical/electronic
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$19.940
Owned Owned
Unknown

Must be logged in to use chart
PAST TOP PICK
Gilead Sciences Inc.(GILD-Q) 

November 2, 2017

(A Top Pick Nov 29/16. Up 1%.) Part of the issue with them was that they had a couple of drugs, one for hepatitis C that was so good that it was curing people. The market was worried that revenues were going to fall off because of that. They had lots of cash, so recently made an acquisition in the cancer area. They still have lots of cash. Thinks the AIDS drug will do well for them. They still have things in their pipeline that people are giving zero credit for.

biotechnology/pharmaceutical

(A Top Pick Nov 29/16. Up 1%.) Part of the issue with them was that they had a couple of drugs, one for hepatitis C that was so good that it was curing people. The market was worried that revenues were going to fall off because of that. They had lots of cash, so recently made an acquisition in the cancer area. They still have lots of cash. Thinks the AIDS drug will do well for them. They still have things in their pipeline that people are giving zero credit for.

biotechnology/pharmaceutical
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$73.810
Owned Owned
Yes

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COMMENT
ING Groep NV(ING-N) 

November 2, 2017

ING (ING-N) or LLOYDS (LYG-N)?Lloyds is predominantly a retail bank in the UK, and this is predominantly a retail bank in the Netherlands. They had to sell off a lot of businesses. This is probably the stock to own over the next little while. They've taken a lot of costs out, and should see a growth in earnings.

investment companies/funds

ING (ING-N) or LLOYDS (LYG-N)?Lloyds is predominantly a retail bank in the UK, and this is predominantly a retail bank in the Netherlands. They had to sell off a lot of businesses. This is probably the stock to own over the next little while. They've taken a lot of costs out, and should see a growth in earnings.

investment companies/funds
Paul Harris, CFA

Portfolio Manager and Partner, Avenue Investment Ma...

PricePrice
$18.500
Owned Owned
Unknown

Must be logged in to use chart
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