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Stock Opinions by Paul Harris, CFA

Fed actions driving the market?

Not really. They've made it very clear what they're doing. Issue is the notion out there that once the Fed stopped raising rates, it would start to lower rates very quickly, and that's not the case especially with what happened with US financials. 

Real issue is that they have to keep rates higher for longer. Inflation remains an issue, and they need to bring it down. YOY numbers have come down. They really need to keep rates up until they see inflation come down to a reasonable level. Whether that's 2% or not, he's not sure. Probably won't see rate decreases until next year.

A Comment -- General Comments From an Expert
US market.

90% of the gains in the S&P came from 7 companies, tech companies really. April was a good month. But if you were in consumer discretionary and staples, basic materials or regional banks, you didn't do very well. It's a very narrow market, which worries people, as the breadth of the market is not very strong. Something will have to give.

The other issue is there's also a lot of complacency because the VIX is down around 16. You'd think it would be higher given interest rates, the debt ceiling issue in the States, and the narrow market. You may see more volatility in the stock market, but that's not a bad thing for long-term investors, as it gives them a chance to buy companies they really like at reasonable valuations.

Think about which companies you want to own, and get ready to buy when you see the volatility.

Union Pacific Corp

Great industry to be in with consolidation and pricing power. Environmentally friendly. Rails predict the economy. Numbers were down, so UNP anticipates deceleration in economy. All rails will do really well when we come out of the slowdown. He owns CNR.

Manulife Financial

Book value is $30, and it's trading below that, so you have a chance to buy it below book value. Great dividend yield. Great business in Asia is undervalued and will continue to grow. Interest rates help. Fundamentals are really strong.


Not expensive at 14x. Being broken up into 6 different businesses. Issue for him is that when the Chinese government tells you to do something, you do it. This makes running a business difficult. Better off buying a global company with a Chinese presence.


He doesn't own any airlines, too cyclical. Had pricing power after Covid. Dealing with leasing planes, wage pressure, lower capacity, fuel price increases. This all hurt them. Things may improve if they can increase prices and capacity and if the cost structure evens out.

Open Text

Not expensive at 9x earnings, huge free cashflow. Growth by acquisition story. Strong revenue growth, but not mirrored in free cashflow growth. Buying it won't hurt you, but he prefers something like MSFT. Yield is 2.3%.

computer software / processing
Firstservice Corp
(A Top Pick May 24/22, Up 25%)

Unique Canadian company. Low capex. Lots of free cashflow. Growth is organic and by acquisition in a fragmented industry. They acquire cheaply, and this is key. Will continue to outperform over the next several years. Still a chance to buy now.

other services
Zoetis Inc
(A Top Pick May 24/22, Up 14%)

Livestock business grows at 5%, pet business has grown like gangbusters. Great products in pipeline, great chance to grow business. Great R&D. 

Consumer Products
Walt Disney Co.
(A Top Pick May 24/22, Down 9%)

Great brand. 41% of revenue is from parks, and the headwind from Covid is getting better. Media business is tougher. Streaming will take time to figure out. New CEO is a positive. Buy here, you won't regret it in a few years.

entertainment services
Cenovus Energy

Because of ESG pressure, big cap oil has decided to buy back shares, pay down debt, increase dividends, keep capex reasonable. Not bad to own over the long term, as oil production is not increasing so prices will stay higher. Hasn't liked CVE since it was spun off. He owns and prefers CNQ.

oil / gas

Because of ESG pressure, big cap oil has decided to buy back shares, pay down debt, increase dividends, keep capex reasonable. Great job of making good acquisitions and executing well, including being on time.

oil / gas
Nutrien Ltd.

Potash prices really increased after the war in Ukraine. But now prices have come down more to reality. Hard to increase capacity effectively. Forward guidance is poor. If there's growth around the world, this will also grow.

Air Canada

Great pricing power, especially here in Canada. Cost headwinds. People are travelling more. Great job on service quality. A difficult, cyclical business long term. 

TC Energy

Difficult environment in this country for infrastructure. So the focus has to be on the US where they can grow and do acquisitions. Nice dividend yield, not expensive. He owns ENB instead, as it has a clear US strategy.

oil / gas pipelines
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