Gordon Reid

Disruption to markets by the Fed. 2022 will be interesting. Expect more volatility. The last couple of years have provided exceptional returns, and we shouldn't expect the same. Yet there's no reason not to expect a good year, as corporate profits remain very strong. Though the Fed is positioned to raise rates, his base case is we'll see a lessening of inflationary pressures. This will let the Fed ease up on the brake and not be quite so aggressive in raising rates. Minutes yesterday were not any different from what was telegraphed in the fall. They are more hawkish, and we can expect increased rates in 2022, but not to the level of extinguishing a very good economy. Have to be careful that the Fed doesn't make a policy mistake in being too aggressive, putting the economy into a recession, though likelihood of this is low.

Inflation. A couple of years ago, Fed was worried there wasn't enough inflation. Fed hasn't been unhappy with asset inflation. Liquidity push has led to higher prices in stock and real estate markets. Cost push inflation is of more concern to everyday people, and Fed is more sensitive to that. Supply chains should start to improve. Inflationary scare will start to diminish. Next 12-18 months, we'll regress to 2-3% core inflation levels.

Market can advance even if valuation multiples compress. Balancing act. We like stocks to go up and make money, but as the price of anything rises its value tends to drop. We've seen advancing prices in the markets, but also very strong corporate earnings. In 2021 we saw the S&P in the high 20% range, but valuations dropped because we saw a 45% rise in corporate profits. He expects another good year where we get good returns in the market, but valuations don't get stretched because corporate profits keep pace.

Leadership position in vaccine fight. If you invest here, and pandemic goes away, PFE's fortunes could regress to the mean. It won't have the wind at its back anymore. The uncertainty makes him pass.

Our long investing memories cloud judgement. Mismanagement and bad luck have brought hard times. Doesn't see a resurrection. Reverse split resulted in increased share price. Neither finances nor prospects are strong.

Portfolio is attractive, with GM, BAC, AAPL, which he all owns. He struggles why we need an intermediary to invest, tends to cost the investor money. He'd rather own the companies directly, especially when DIY trading fees have come down. Rich valuation.

About 55% of revenues come from groceries, an incredibly low margin business. Led the way to increasing wages for their large labour force. He'd rather go with something more new tech like AMZN, with higher margins and higher valuation that it will grow into.

Orphan child of money centre banks, not doing as well. It is inexpensive, but it's cheap for a reason. What's the catalyst that will move the needle? New management. Not enough there for him to invest. Likes the sector and the regionals. Banking is the place you want to be, just not here.

(A Top Pick Jan 19/21, Up 39%) Still likes. Trading at 15x earnings, quite inexpensive. Major competitor, UNH, trades 6 points higher. Adding insureds, now up to 43M in the US. Growing well. Expected EPS for 2022 is $29.

(A Top Pick Jan 19/21, Up 42%) Debt is manageable. Free cashflow of about 13B. Well capitalized. Insurance, pharmacy with HealthHub, pharmacy benefit manager. Not expensive at 13x earnings.

(A Top Pick Jan 19/21, Up 17%) Customer experience business. Big business, not a big company. Growing about 20% per year, trading about 20x earnings. Quasi-technology. Performing extremely well.

Long runway of success in front. Heavily involved in EVs. By 2025, they'll spend 27B on EV and 40% of products will be EV. Margins are very good, better than Ford. CEO projects revenues doubling by 2030, representing 8% topline growth. Very strong valuation.

TSLA vs. traditional car makers. Market is recognizing value in GM and Ford. From an investment standpoint, there's more risk in TSLA. For example, GM's valuation is 6.5 enterprise value to EBITDA, whereas TSLA is about 95. TSLA has done a fabulous job, but you have to marry the fundamentals with the price you pay. TSLA is overvalued. He's gone with mainstream companies with a lot of potential, rather than momentum investing.

Great company, good times ahead. Stretched valuation, so your potential return might be in jeopardy. An investment now worries him, especially in this time of rising interest rates. High growth stocks tend to be negatively impacted, as the discount rate goes up.

Chose to sell at start of pandemic, as it relies on density of people. Then it kept rising, based on streaming. Market was giving a lot of premium to streaming potential. Looking 5 years forward, he couldn't see that streaming subscribers would justify the expectations. Market's figured this out too.