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US. There have been some positive economic surprises. Most of the regional PMI’s (Purchasing Managers Index) that have come out lately have been not just above expectations, but above the highest estimates. Regarding US economic growth, there was a sense for a little while that people would start to fear the Fed would start to take the punch bowl away but then we saw the market recover when people started to think that maybe it would not be that soon. If the economy is in a self-sustaining reasonable growth mode and rates go up only because of that, maybe it is not so terrible. When there is growth in the economy and things are going well, small and mid-cap companies do quite well. In a rising market they tend to outperform the broader indexes. He looks for growth, first and to him growth means revenue growth above and beyond the economy. Also, looks for strong economics in a business, so whatever that growth rate is, does it have high margins and high ROC and does the management team make allocation decisions that make sense to him. In a reasonably good economy, with the way things are going, especially in the US, he expects to see good things out of some of the industrials, some of the regional banks and technology companies.


Likes the company. An impressive business. Has a great market position in the US, similar to what a Tim Hortons (THI-T) might have in Canada. They also own the Baskin-Robbins brand, which has great global growth. Pretty fully valued.

food services

He would prefer to be a little more selective when buying a bunch of US regional banks. Would want to know what market segment is being targeted by a bank and the geographic area they are in. There are parts of the US that are doing better than others. An ETF gives you exposure to everything. (See Top Picks.)


Given the power of the brand, he expects this company will be somewhat bigger in a multiyear time span compared to what it is today. However, the price you are paying for the free cash flow is very big. 31X current earnings and 24X forward earnings. One way you could have exposure to this is through Fossil (FOSL-Q), a manufacturer of watches under their own name and for others including this company.


Auto-parts is pretty much a long-term growth business. Attractive area to be in and historically pretty highly correlated with a housing recovery. At the same time you have emerging-market growth. This company has active and passive safety margin products and has a pretty good reputation with decent margins. His preference would be Delphi Automotive (DLPH-N) which has a presence in active safety such as electronic scanning radar for lane departure warning systems, which is still a high margin business.

Consumer Products

Great management team and great prospects. Auto-parts is pretty much a long-term growth business. Attractive area to be in. Historically is pretty highly correlated with housing recovery. At the same time you have emerging-market growth. This company is involved in 3 key areas including 1) fuel efficiency 2) electronic architecture in cars and 3) active safety such as electronic scanning radar for lane departure warning systems, which is still a high margin business. Trades at the discount to the sector because of a pretty ugly history.

Altaba Inc

New CEO is making some changes and the stock has gone up 50% in the last year. Does seem like some positive stuff but it is a challenged way to make money on the web. You have some media products, that are reasonable categories to be in but it doesn’t necessarily generate traffic on a consistent basis. The tough part is convincing advertisers that they need to be there on an ongoing basis day in and day out. If you own, he would look for other places to go.

computer software / processing
Aruba Networks

Has taken some share of the wireless networking industry over the years and have about a 12% share. When talking to distributors and customers of wireless network products, they feel this company a half a step ahead of Cisco (CSCO-Q) and maybe a full step ahead of some of the others in the business. Very cheap. PE is about 24.29.

Och-Ziff Capital

He is not an expert on this company but money management is an excellent business to be invested in. Money managers have a very profitable business. This is an industry that does not require a ton of capital. When it is working and the assets are growing, it spins off a lot of cash so free cash flow is very high in this business. Good idea to have some exposure to this industry and this company has a pretty good reputation.

Financial Services
Iberiabank Corp

This is a great opportunity. Headquartered in New Orleans. Good operators. After the crisis, they bought a number of different banks from the FDIC that were in trouble. Some of the banks gave them more exposure in Texas and Alabama so they are positioned across the southeast where economic growth is better. Yield of 2.54%.

Financial Services

You are seeing some of the PMIs (Purchasing Managers Index) pick up. This company is a distributor of tools, primarily metalworking. They are taking share from the smaller mom and pop companies. A little beat up lately but if the industrial picture picks up a bit, this company has great leverage to US manufacturing. Yield of 1.55%.

merchandising / lodging
Did well and then came off like a lot of the commodity/chemical companies. On these cyclicals, it's the price of the commodities. In this case, the cycle is getting fairly extended.
A semi-conductor company. In a transition phase. Used to make mostly commodity products but is now going proprietary which are all about power management in PC's, home appliances, flourescent lighting, etc. Looking to increase margins to 50% and the market hasn't accepted this yet.
electrical / electronic
Devon Energy Corp
Doesn't follow this one closey, but feels they have done a pretty good job. Have taken their resource exposure, including energy, down.
oil / gas
Primarily involved in cardiovascular products. Half the business is in heart valve therapy with about 45% of market share. Have some new products that could create new markets for them and this hasn't been priced into the stock.
biotechnology / pharmaceutical
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