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Stock Opinions by Paul Harris, CFA

COMMENT
Investor complacency and market opportunity. The VIX is at 20. There's some complacency around what's going to happen in the market over the next year or so. Earnings for the S&P 500 are probably still too high. If we enter a period of slower economic growth, those numbers have to come down. Most of the companies report over the next couple of weeks. Earnings for the S&P 500 have slowly come down, but there's more to go and that's when you want to look at buying.
Unknown
COMMENT
A Comment -- General Comments From an Expert
Inflation. Canada started increasing rates a lot faster than everybody else. Central banks around the world are still going to be increasing rates, albeit at a slower rate. If you look back to 2019, a lot of things like oil and gas are at the same price, so nothing's really changed. Even GDP is not that far off what it was before. The one thing that has changed is interest rates/inflation. Supply issues caused inflation with prices going up. Over the next year, that should change, especially if China really starts moving again. Though this will have implications for oil, in general it should add some deflation to the environment. May have a rocky road for the next little while, but in chaos there's opportunity. Pick companies that you want to own for the long term and put them in your portfolio at cheaper multiples, though they may still fall a bit more.
Unknown
DON'T BUY
A Comment -- General Comments From an Expert
Gold. He doesn't own gold or gold stocks. Owning gold doesn't pay you anything. It's done very well in the last little while, perhaps because Bitcoin isn't as stable as people thought it was going to be. There's a feeling that the USD is coming off, and that will help gold. The feeling that interest rates are being lowered is also helping. He'd rather own gold than the stocks, because you have to deal with company dynamics as well as geopolitical issues. They don't meet their cost of capital on a regular basis. Has the potential to go up from here. It might have done poorly or been flat last year, but it didn't hurt you.
Unknown
BUY
Roche Holding
Great company. Diagnostic businesses helped through Covid. Some of the pipeline is coming off patent. Used free cashflow to buy back shares and to buy a few businesses. This will be the macro trend: buy pipelines, because they can't R&D drugs fast enough. 15x earnings, yield is 3%, not expensive. Only problem might be having to buy it on a foreign exchange.
Healthcare
BUY
Rio Tinto
Followed the trend of buying back shares, increasing dividend, divesting non-core assets. These companies are in much better shape financially than ever before. Capex discipline. Will benefit from China coming back online. Cheap multiple.
other mines
COMMENT
Invest in Europe? Hedge the CAD? He doesn't hedge the CAD at all because these are long-duration assets, plus a lot of companies like MSFT manage the foreign exchange themselves. There are great European businesses, and you should own them if you can find them. But there are a lot of great companies in Canada and the US that have access to the rest of the world, and you're not taking as much currency risk. However, hedging a bond portfolio that's investing internationally makes a lot more sense, as you need to be able to hedge the maturities.
Unknown
WEAK BUY
Great West Lifeco
Instead, he owns POW, the holding company. Thinks POW can narrow the discount on its NAV. GWO is not expensive at 1.1-1.2x book. Great dividend yield, low PE. US asset management arm has been tough, but should improve.
insurance
HOLD
Power Corp
Thinks it can narrow the discount on its NAV.
mngmnt / diversified
COMMENT
Canadian banks. He owns CM, BNS, and RY. Canadian banks are not expensive. Difficulties with housing market plus slowing economy are pushing them to over-reserve. 2008 scared them. Not expensive, great dividend, oligopolies. CM has always been a difficult story. It had a great retail franchise, until investment was diverted to wealth management where it's always been playing catch up. Great businesses, will continue to do well. May suffer this year on asset management and investment banking. BNS international business sometimes gives them a higher multiple, but sometimes a lower one in times of slower economic growth. Any of them should do well for you.
Unknown
BUY
Not expensive, great dividend, oligopoly. Difficulties with housing market plus slowing economy are pushing them to over-reserve. CM has always been a difficult story. It had a great retail franchise, until investment was diverted to wealth management where it's always been playing catch up. Great business, will continue to do well.
banks
BUY
Bank of Nova Scotia
Not expensive, great dividend, oligopoly. Difficulties with housing market plus slowing economy are pushing them to over-reserve. International business sometimes gives BNS a higher multiple, but sometimes a lower one in times of slower economic growth. Great business that should continue to do well.
banks
BUY
CVS Health Corp
Started as a drugstore, and now integrating themselves horizontally into insurance and health. Over time, that will pay off. Volatility in the meantime. They'll continue to buy assets. Stores are becoming extensions of doctor's offices.
specialty stores
PAST TOP PICK
Firstservice Corp
(A Top Pick Mar 16/22, Up 8%) Low capex. Down market provides really good opportunities to purchase assets. Still lots of opportunity to grow. Stock fell, good time to buy.
other services
PAST TOP PICK
(A Top Pick Mar 16/22, Down 23%) High multiple stock and tech has been difficult. Customers that over-expanded during Covid got hurt, so this got hurt too. Wisely used balance sheet to make acquisitions at discounts. E-commerce isn't going away. Will be debt-free by end of this year. Great free cashflow growth.
electrical / electronic
PAST TOP PICK
Stryker Corp.
(A Top Pick Mar 16/22, Down 2%) Great business. Backlog in elective surgeries due to Covid will lead to good earnings growth going forward. Good growth internationally. Demographic play. Loyal customer base. Great medical device story.
biotechnology / pharmaceutical
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