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Stock Opinions by Paul Harris, CFA

COMMENT
Covid will linger for a while until we return to normal. To figure out where we are in the world is a lot more complex, but we are in much better situation than a year ago. If we stay on this course, the numbers were be better, but expect volatility as banks around the world must inevitably slow down quant. easing, though the banks must be careful, because economies are fragile. We'll be in this situation well into 2022. Supply chain disruptions are more disruptive than an overheated stock market. He expects more normalized growth in 2022. Governments have been taking on more debt during Covid, and they will weigh on those nations' growth. Meanwhile, consumers are spending less (as seen in lower credit card balances) though they are getting more credit cards. Inflation will certainly exist going forward.
Unknown
COMMENT

Usage has gone down, maybe because people are returning to the office and students are on vacation. Also, there's more competition now, not just Microsoft and Google. Zoom and its technology are here to stay, but the valuation needs to come down. As we normalize work and people return to offices, then businesses may use other platforms, or the small offices may use the free Zoom service. Zoom is more branded than its peers, so that is a competitive advantage. However, students will return to classes and won't be taking classes online.

Technology
DON'T BUY
People own this for the dividend, and pre-Covid this company was innovative with preferred seating and cafes, and programming opera and sports. But this is a difficult environment now; he doesn't see people returning to cinemas given social distancing. Also, the studios are releasing films on streaming. True, a lot of blockbusters will be released, but those films will also be released at home, too.
other services
WEAK BUY
Credit management for weathering the Covid storm, but Covid will overhang the stock for a while as visitors may worry about staying in people's homes. Personally, he thinks hotels are safer to stay at, because hotels have to follow established cleaning protocols. Domestic travel is doing well, but international travel still lags. And the gap in rates between Airbnb and hotels has shrunk. People love Airbnb, especially young people, and this will continue. Consider buying the stock now as we move towards normalcy.
Technology
DON'T BUY
It's one of the cheaper tech stocks, but all tech stocks in China are facing regulatory hassles, especially BABA-N. This is baked into the stock, so eventually you want to own this. The government shut down BABA's IPO of AliPay. Also, it's traded in New York, so Wall Street is demanding full disclosure of its metrics, but the Chinese government doesn't want to reveal that much information. You can face trouble with this stock down the road. BABA does have a great e-commerce business, and it's expanded into areas like education. Overall, he wouldn't buy it.
0
PAST TOP PICK
(A Top Pick Aug 20/20, Up 16%) Trades at 33x PE and pays only a 0.6x dividend yield. But it boasts great free cash flow growth. Visa is not a credit card per se, but a payments system, which is less risky. It's like a toll both where they take fees. Covid hurt them because people weren't traveling much or dining out, but expect re-acceleration in these areas this and next year. This will result in revenue growth around 9-11%. Cash is no longer king as more people use credit cards. There's room to grow in parts of the world as those people use more cards. Loyalty programs will help drive this growth.
other services
PAST TOP PICK
(A Top Pick Aug 20/20, Up 20%) Has long held this. Pharma, medical devices and personal care are their businesses. Unlike other pharmas companies, with JNJ when one sector lags, the others carry the weight. For example, medical devices (due to few elective surgeries) plunged during Covid, but bounced back 58% in revenues last quarter. JNJ has increased their dividend for the last 40-50 years annually. Great balance sheet, and raised guidance in their last quarter which they also beat. A risk are lawsuits; they could lose a suit in the future and pay big settlements, like $250 million to settle to opiod-addiction suit in New York state.
biotechnology / pharmaceutical
PAST TOP PICK

(A Top Pick Aug 20/20, Up 79%) It trades at 27x earnings with a 3% cash flow yield. No debt and carries $57 billion in free cash flow this year. Big secular growth in online ads will continue. Their market share in online search remains huge. Also, YouTube is nearly as big as Netflix. Strong balance sheet and the runway is long. Regulatory threats are possible, but that's a long legal process and the market doesn't seem concerned now.

Business Services
BUY
They beat numbers today, including mortgage loans and investment management businesses. All the Canadian banks are flush with capital. He expects the regulatory to eventually buyback shares and raise dividends, and stocks will rise. Banks are putting those pandemic reserves into earnings. BNS will do well, especially with buybacks and dividend raises.
banks
COMMENT

SHOP vs. Constellation Software E-commerce continues to proliferate our economy, and SHOP grows organically. In contrast, CSU is more of a growth-by-acquisition story, buying software companies to grow in size. Therefore, CSU is safer, but SHOP has much better growth prospects. SHOP recently did a deal with Facebook. SHOP and CSU are apples vs. oranges. SHOP has more pricing power in the stock than people think as they gain market share, but he isn't sure about this with CSU. CSU has great managers and acquire well.

0
TOP PICK
Price target: 169.22 Euros A merger of a French lens company and an Italian frame company, including brands Ray Banz, Chanel, Prada and Oakley, The lens business is stable and amounts to 66% of their revenues. The merger wasn't easy, but he expects $500 million in cut costs. They bought Grand Vision, and its 7,000 European stores to make them a major player in lenses and frames. Now, their online sales are nearly #1 in this space. The only business where they lack are contact lenses. ESLOY is well-integrated, with many of their businesses #1 in their categories. There's a trend of people needing glasses because of looking at TV and computer screens.
Healthcare
TOP PICK
Has long held this. They produce medical devices for hips, knees and spines. The sector fell off during lockdowns due to no or few elective surgeries, however that is rebounding. Also, this is a demographic play as the population ages and needs such surgeries. Also, doctors stay loyal to a brand of medical devices. Trades at 25x earnings and has $3.7 billion in free cash. (Analysts’ price target is $288.43)
biotechnology / pharmaceutical
TOP PICK
It boasts a large, growing user base. Data they collect fuels ads and contents. It's one of the most underlevered internet companies. We still haven't seen the monetization of Whatsapp and Instagram. They are getting stronger in mobile. It trades at only 23x. There will be strong cash flow growth ahead. (Analysts’ price target is $416.50)
0
COMMENT

SHOP vs. Constellation Software E-commerce continues to proliferate our economy, and SHOP grows organically. In contrast, CSU is more of a growth-by-acquisition story, buying software companies to grow in size. Therefore, CSU is safer, but SHOP has much better growth prospects. SHOP recently did a deal with Facebook. SHOP and CSU are apples vs. oranges. SHOP has more pricing power in the stock than people think as they gain market share, but he isn't sure about this with CSU. CSU has great managers and acquire well.

computer software / processing
COMMENT

Buy on current weakness? He owns CNQ instead. His strategy is to own the larger-cap oil companies. SU will spend some money in capex and likely increase that, buyback shares and raise their dividend. All large oil companies around the world are doing this. Of course, rising oil prices will help. These companies are in better shape than before. Both SU and CNQ make acquisitions at the right time.

integrated oils
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