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Stock Opinions by Bill Harris, CFA

COMMENT

The Central bank is not supposed to meddle in the U.S. elections so in theory they shouldn't be doing a new set of interest rate cuts. There is growth so the economy is not slowing down and therefore why are rate cuts needed. Maybe rates should stay at 5% with low unemployment, decreasing inflation and continued growth. Since last October there has been a very strong S&P and large cap tech market. The S&P could continue to go up or turn down and that will depend on the catalyst of interest rates. He is looking to add high quality businesses that are doing well and also a little bit ignored. Money will flow around the stock market and push things around so these types of quality businesses may get a boost from that movement. He is therefore not negative on where things are going.

Unknown
Unspecified

It is in both the alternative and standard energy space but is selling its renewable assets. He is not sure of the prices these will bring in at this point. It could rebuild but big investments are needed in this space. Input costs are higher now and the industry needs electricity prices to go higher.

electrical utilities
BUY
Arc Resources Ltd

It is a soft spring for gas prices and we have had a very warm winter, therefore the demand is down. The interest has been in technology and AI. The market has tightened up recently and money has come back. It is at multi year high. It is 50% natural gas and 50% liquid gas, which he considers similar to oil. He owns Tourmaline for gas exposure and CNQ for oil exposure. If he owned another it would be ARC which covers both sectors. It is good for returning money to shareholders.

oil / gas
HOLD
Royal Bank

Banks are good to own for the long term. They did reduce their holdings 1 1/2 years ago. He wants to see how the digestion of its mortgage business runs through the financial system. Banks are getting the benefit of higher interest rates but the bulk of refinancing mortgages at higher rates is still to come over the next one to 1 1/2 years. He wouldn't add at this time.

banks
COMMENT

The question was on his preference re Canadian Natural Resources or TC Energy. TRP has a lot of debt and it's hard to build a pipeline. CNQ has driven down debt. It will sit at a lower level of around $10 billion and return excess money to shareholders.

oil / gas
COMMENT
TC Energy

The question was on his preference re Canadian Natural Resources or TC Energy. TRP has a lot of debt and it's hard to build a pipeline. CNQ has driven down debt. It will sit at a lower level of around $10 billion and return excess money to shareholders.

oil / gas pipelines
COMMENT
Hudbay Minerals

It has some very good assets but it is hard to figure out just what it is going to do. Copper didn't come off as expected and is still quite strong. He likes Lundin in the mining space and it fits into his income strategies. He also likes Encore Wire (WIRE), the largest copper recycler in the U.S. and is not a depleting resource business. It trades at a reasonable multiple and its growing consistency takes out the volatility. It has $1/2 billion in cash and is buying back stock.

precious metals
COMMENT

The question was on owning gold bullion itself. If investing in gold he would not recommend going into the futures market. Gold holds its value over time but there could be stretches of 5 years where it goes nowhere. The price of gold has just broken out. The cleanest way to play gold in the stock market is through royalty companies.

Unknown
Unspecified

The concern is on its mine in Panama and what the government will do. There is an election coming up and there could be a compromise on the opening of the mine. With First Quantum and Franco Nevada both having a stake in this mine there is basically a free option based on the price of their shares. Both companies have upside at this price.

integrated mines
PAST TOP PICK
Cenovus Energy
(A Top Pick Sep 08/23, Up 2.2%)

Editor's Note - This past pick was not the common stock but the corporate bond. The total return is a bit mis-leading due to the nature of bonds, and is actually higher than shown. In general, corporate bond spreads are very tight now due to the fact that there is no supply and too much demand. There is not as much corporate debt out there.

oil / gas
PAST TOP PICK
(A Top Pick Sep 08/23, Down 29%)

The CFO has been suspended due to questions around accounting. Also there have been operational problems. He got stopped out and replaced it with Deere, a long term buy, since he wants something in the agriculture space.

food processing
PAST TOP PICK
(A Top Pick Sep 08/23, Up 14%)

Last year was hard on this company with interest rates having moved way up so quickly. It is in the short term mortgage market business. Property prices are coming down. It still pays a 9% dividend and is trading at a 10% discount to its hard cash value. It is in their income portfolio.

Financial Services
Unspecified
Toronto Dominion

Although Canadian banks are good for long term portfolio holdings there is a problem with TD since it has gone into the U.S. where it is just too competitive. TD is more like a regional bank there. Its numbers are fine but not fantastic. He switched to National Bank.

banks
BUY
Exchange Income

It is unique in the commercial flying business in Canada. It has a very good track record, but there doesn't seem to be a catalyst for growth going forward. He owns it in their income portfolio since its great rate of return means that shareholders are participating in its profitability.

Transportation & Environmental Services
BUY

It is a great Canadian success story but is at a new low due to concern about being in Columbia. However Columbia needs Parex for its technology. Although it didn't hit production levels in the fourth quarter it is adding production and there is a big exploration upside. It is very profitable and is buying back 30% of its shares over the next few years.

oil / gas
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