Mark Grammer

[Note: President Trump announced tariffs on China on the day of this interview] He is concerned about risks arising out of trade rhetoric and trade barriers. He met with Steve Bannon last year; Bannon said that the Trump administration is willing to accept a near-term slowdown in the US economy in order to get trade barriers in place. Grammer sees this as problematic

This is an extraordinarily well-run company. He has been a shareholder for a long time but is not one now because of valuation. He will buy again when the price goes down

This is a decent company. He has owned it but does not now because he doesn’t see much upside at this time. Cost containment would improve their margins and would therefore improve their value. He doesn’t see room for a lot of growth of this company in Europe. The dividend will probably be safe but only modest growth. (Analysts’ price target is 17€, the stock trades at 14€)

This is a very good company, well-positioned, but it is facing pricing pressure. The market share is around 80% so there is not much room for growth. Their recently-released earnings were decent. They increased the dividend a little. This company, like other large mobile operators, is more a dividend play than a growth opportunity. There stock has been drifting lower this year because there is not much interest in the name at this time.

He thinks the spirits industry is in a good position now. Scotch whiskeys are in short supply, other whiskeys are selling well. Diageo is the world leader in this. He will buy this when it hits the right price. He discussed cannabis with them a few months ago. They have made initial investments in cannabis stocks but are still taking a wait-and-see attitude. He expects them to acquire a cannabis company later, after the dust settles.

This is in a similar place to Orange, China Mobile and other large and successful telecom companies. They are a dividend play, not a growth play. Dividend plays are less attractive in a rising interest environment. This is a rational competitor and investors are not likely to lose money in it.

He likes it because of its exposure to Entresto, which cardiologists often call a wonder drug. The drug is relatively expensive ($9 per day) so the issue is getting insurance companies to pay for it. He thinks the runway for the drug is excellent and that it will become a blockbuster within a year or two. Pharma companies are under pressure because Trump is currently talking about reducing drug prices, but he (Grammer) is willing to wait on this stock.

(A Top Pick April 20, 2017. Up 51.66%). This is a play on the tight Japanese labour market. Persol has done well as a temporary placement agency and has expanded into recruiting, which is a higher-margin business, and is doing well there. Persol was founded by a woman (and it has made her the wealthiest woman in Japan). It finds opportunities for women in an economy that is somewhat male-dominated. This is a distinctive and successful aspect of its business.

(A Top Pick April 20, 2017. Up 16.98%). This is one of the biggest banks in Thailand. This is conservatively run. The economy slowed down last year during a year-long period of mourning for the deceased Thai monarch. That has finished and the economy is picking back up. He expects infrastructure spending to increase, which will filter into small and midsize enterprises which is Kasikornbank’s sweet spot.

(A Top Pick April 20, 2017. Up 19.98%). This is a well run company. Bernard Arnault is a fantastic manager; he moves people around in the company to broaden their experience, and shakes things up. Grammer sees this as the world’s leading company and as a company he could own forever.

This is a well-placed company, the Google of China. Search will continue to grow. Baidu has had some hiccups along the way but they are doing well now. They have heavy investment in artificial intelligence which he thinks will be valuable. He is out of Chinese technology companies at this point because of valuation. He thinks these stocks are a little frothy at the moment. If he had to rank potential investments in Chinese technology, he would place Tencent Holdings at the top. Baidu might be second, followed closely by Alibaba.

This is another dividend stock. Given the outlook on interest rates and the central bank quantitative tightening around the world, he is not excited about dividend plays. In addition, tobacco is a challenged industry. He thinks Japan Tobacco will have to make an acquisition, probably Imperial Tobacco, so there is a lot of uncertainty here. (Analysts’ price target is 4000¥, the stock trades at 2800¥)

He thinks the price is frothy. If someone holds it now, and has made a profit, this is a good time to take profits. (Analysts’ price target is 146$)

He doesn’t invest in ETFs. As a matter of policy, he believes he can do better with individual stocks as an active investor. His weighting of China is down. He expects the Chinese government to appease the United States in limited ways over the short term rather than engaging in a trade war. This may slightly reduce the growth of the Chinese economy, say from 6.5% to 6%. The Chinese economy is in a state of transition, with more emphasis on domestic consumption. This will limit the impact of trade barriers, but at this time, there is enough risk that he has reduced his emphasis on China.

TSM is on the leading edge of the semiconductor industry. They use some of the most sophisticated equipment and can offer customers excellent products. There is some concern because the visionary CEO has retired and it too soon to tell whether new management will be as visionary. Also there is concern that the tech space has run too far and may be due for a pullback.