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Stock Opinions by Karl Berger

N/A

Markets. Whatever happens, we are going to continue to be in a low growth economic environment into 2013 and we need to accept that. Whether the driver comes out of the US, out of Europe or out of China, there are some positive things that we can look to in each of those different scenarios. Global growth is going to remain slow and we are going to have to deal with that environment. People need to be very cautious in this environment about precisely what kind of companies they own and what the yield represents. However, they also need to be cognizant of the alternatives to the equity market of very low yielding fixed incomes.

Unknown
DON'T BUY

There are headline risks with any of the pharma stocks and this is not an area that he gravitates to despite the fact the dividends are reasonably solid, have been paid for some time, and would likely be paid for some time. Issue for many of the big pharmas is the risk of the shift away to generic drugs and the lack of growth prospects that result from that dynamic.

biotechnology / pharmaceutical
COMMENT

Had a pretty decent run over the last little while. Pretty good defensive company. Likes the mix of revenues that come from emerging markets. Given the run-up it has had, he would recommend watching it and trying to get it a little cheaper or put only 50% in and add to it when the opportunity arises.

food processing
COMMENT

Just announced they are acquiring Plains and McMoran for $9 billion so are getting deep into oil now. Whenever a company like this dilutes their product offering or their focus, it can be very good or sometimes a challenge. Market is treating this as a challenge but he doesn’t know that he would jump to that conclusion. Well managed. Don’t expect they would get into an endeavour like this without having done thorough research.

non-base metal mining
N/A

Caller is thinking of putting 30% (3 of his stocks) of his RRIF into Singapore. Notion of putting 3 stocks as 30% of your portfolio seems excessive. He would much prefer to see a portfolio that was diversified with no more than 3%-5% in each holding. No problem with putting 30% of your portfolio outside of Canada.

Unknown
DON'T BUY

Not a stock that he would be keen on at this time. Dividend has disappeared but he believes it will be coming back. Heavy levels of debt and the Spanish economy is still not in particularly good shape.

telephone utilities
DON'T BUY

British economy is still struggling. You have to look at any European bank at this point as having an awful lot of exposure to an area that has a very uncertain economic future ahead of it. Still too many headwinds.

banks
COMMENT

He exited their positions recently because of concerns over the euro. Pays a solid dividend and the dividend is safe. This will be a boring, defensive holding that should just churn along with possible marginal dividend increases.

food processing
PAST TOP PICK

(A Top Pick Nov 22/11. Up 27.46%.) Still likes. Has managed decent same-store sales growth. Not overvalued yet.

merchandising / lodging
PAST TOP PICK

(A Top Pick Nov 22/11. Up 16.63%.) Videotron 6.875% bonds maturing July 15/21.

Unknown
PAST TOP PICK

(A Top Pick Nov 22/11. Up 3.61%.) Dividend is solid, very sustainable and will likely grow. A little disappointed that company management hasn’t grown at a more active pace. A little conservative. If the price of oil stays reasonably consistent, he expects they could get spectacular dividend growth over the next little while.

integrated oils
WEAK BUY

Loves the theme of food commodity price appreciation, which he thinks will play out over quite a period of years. Prefers Agrium (AGU-T) as a way to play this theme because of the exposure it gives to nitrogen-based fertilizers. Going through some challenges on the pricing front right now because of India and China holding off. Also, expect new players will start producing potash as well.

integrated mines
WEAK BUY

Sold his holdings about a year ago because growth prospects weren’t what he hoped for. IT space has been fairly challenging from a number of different perspectives. Have done a couple of really good things recently including instituting a dividend which they could grow over time. Without a real robust economic environment, all of the IT companies face a bit of a headwind.

electrical / electronic
BUY

Likes this equally well as Royal Dutch Shell (RDS.A-N), which he owns.

integrated oils
DON'T BUY

Early reviews are good in terms of the Windows 8 operating platform and in terms of the Lumia phone. His sense is that it is a little too early to claim victory in the battle. Looking at the smart phone space, it is incredibly competitive. The amount of innovation required, in shorter and shorter cycles, worries him.

Telecommunications
DON'T BUY

Not one that he would be very keen on at all at this point. Essentially that space has become very, very commoditized. There isn’t an awful lot of ways to differentiate between companies.

0
DON'T BUY

Doesn’t own any exchanges. This one in particular has had some challenges in terms of growth. Decent dividend yield. Stock trading volumes have generally been declining over the last number of years and he doesn’t see many ways to reverse this.

other services
COMMENT

Nothing wrong with their business mix and how they function. You have to look at this in an environment where we are talking about relatively low global growth. There is no rush to get into a firm like this. This is one where you want to pick and choose your entry point.

chemicals
HOLD

Dividend is very sustainable. Relative to their yield on their 10 year bonds, dividend should still be higher but may be equal but now with a higher stock price. Has a decent pipeline for drugs. Medical devices side has functioned reasonably well over the last little while.

biotechnology / pharmaceutical
DON'T BUY

Has had a nice relief bounce off its lows, like many of the European banks. Spanish economy is still facing many, many challenges and he expects they will ask for a bailout. This is a short-term trading stock as opposed to a stock for investment.

banks
DON'T BUY

They will have to find ways to conserve cash in order to get some of their leverage ratios down. Has very few prospects. Questions if the dividend would be sustainable.

Utilities
TOP PICK

Oslo exchange. Likes the business mix that they have. In terms of Europe, it is based on the Norwegian economy. Have a lot of activities in emerging markets such as Malaysia, Thailand and Russia. Also, have a foray into India but that may be coming to an end. This leads to pretty decent growth prospects. Solid dividend, which he thinks will grow. A- credit rating.

Telecommunications
TOP PICK

As companies globally look to reduce costs, there is going to be a continued push to outsource in both the IT and the consulting space. This company is very well-positioned to take advantage of that because of their “best in class” reputation. Have some pricing ability in that sense. A nice business in that it is very asset light in terms of what you need to conduct it.

other services
TOP PICK

Operates in Western Canada, Europe and Australia. A large amount of their oil production is tied to Brent pricing and a large amount of their natural gas production is in Europe and is tied to Brent crude as well. Decent dividend and would look for it to start growing at the end of 2013 and early 2014.

oil / gas
COMMENT

Markets. Action has been fairly positive recently but not sure it is entirely justified by some of the global factors out there. Also, doesn’t think it is as simple as “people aren’t paying any attention because it is holiday time”. There are lots of things that could happen over the course of the fall. There are some interesting value that has been unlocked in companies globally. Company fundamentals have not necessarily been reflected in the equity market. Looking at ROE from a dividend perspective, relative to long-term interest rates, it shouldn’t be as much surprise as to where things have got to. There will be more focus on some of the global factors as we get into the fall. There will be some volatility going forward.

Unknown
COMMENT

Good dividend. Primarily struggling because of the Great West Life (GWO-T) portion of its holding and the fact that in this interest-rate environment, insurance companies have an awfully difficult time in matching future obligations to their current investment portfolio. If and when interest rates start to turn up, insurance companies will be a good play. Little premature to expect much from this company in this environment but at least, with the dividends, you are being paid to wait. His bias might shift away from this company towards Great West Life.

finance / leasing
DON'T BUY

Solid company. The only question he would have is the timing at this particular stage. Wouldn’t favour a portfolio that is heavily weighted industrial oriented at this point. He expects very slow levels of global economic growth. Not a typical environment where an industrial stock would do particularly well. You could probably get it cheaper and it won’t grow dramatically until there is better global growth.

electrical / electronic
DON'T BUY

Packaged foods so a little bit of a challenge if you are talking short-term with regards to input prices for the products. Drought will have an impact on their margins. Decent dividend. Reasonable flattish performance over the last 4-5 years. Nothing to get too excited about in the short run.

food processing
DON'T BUY

(Frankfurt Stock Exchange.) Had a nice run up over the last couple of months. Wouldn’t be his favourite in the area, primarily because their 2 main businesses are Europe and US (through their investment in T Mobile), which has been losing customers to AT&T (T-N) and Verizon (VZ-N). Have to do some things to restructure their business to take advantage of the US market. Europe is pretty challenging from a regulatory perspective.

electrical / electronic
COMMENT

Like other entities in the big Pharma space it is going to be really challenged from a growth perspective in the next little while. In general, no one should be over enthusiastic about the pipeline of new drugs at this stage. Because of their size, it is very difficult for them to grow. Governments are very constrained on what they are allowed to spend on healthcare.

biotechnology / pharmaceutical
DON'T BUY

Any of the European banks that are constrained in terms of capital and are struggling to meet the terms of the Basel 3 Accord are in the process of trying to sell off assets. Even if this bank completes the sale of assets they are contemplating, they might struggle to hit the Basel 3 requirements.

Financial Services
COMMENT

Cdn banks in general are very expensive right now. Considering indebtedness of Canadians and concerns about real estate, it is hard to imagine their loan book growing dramatically. Pays a decent dividend and thinks this will continue. Don’t think you’ll get much more than you are getting now.

banks
COMMENT

Gold stocks have not been very much in favour despite the run-up in gold. Gold has pretty much flat lined for the last year and he doesn’t see much reason for that dynamic to change dramatically over the next little while.

precious metals
HOLD

Feels it is cheap right now but is probably likely to stay cheap for the next little while. Global growth which is not overly robust, doesn’t favour the space that this company is in. He likes their broad geographic exposure. 40%-50% of their revenues are earned outside of the US with quite a bit in more rapidly growing emerging markets. You’ll have to be patient with it. 2.5% dividend.

mngmnt / diversified
PAST TOP PICK

(A Top Pick Aug 30/11. Up 13.9%.) Probably moving into a more fairly valued scenario at this stage. Fantastic operators. Have a number of interesting projects in their pipeline. Expect the Keystone project will probably be passed at some stage. They can fund all of these out of cash flow. Strong dividend that is still growing.

oil / gas pipelines
PAST TOP PICK

(A Top Pick Aug 30/11. Up 84.28%.) A US off-price channel retailer. Basically buy up inventories of brand-name clothing and sell it. Have managed to grow same-store sales fairly dramatically along with their margins. Probably time to lighten up on this one if you own.

clothing stores
PAST TOP PICK

(A Top Pick Aug 30/11. Up 44.17%.) (London exchange.) Have done a wonderful job of expanding into some of the emerging markets. Getting to be fairly valued.

food processing
PARTIAL BUY

Beer market is fascinating now because of all the consolidation. This company is in a fantastic position vis-à-vis their competitors because of the prominence of some of their brands and dominance in major markets. Wouldn’t buy a full position at this time, perhaps a 3rd in case of a pull back.

breweries / beverages
COMMENT

REITs. Have had an amazing run over the last few years. Generally trade very much in line with interest rates. He likes Cominar (CUF.UN-T) and Can Reit (?) but feels that both are nearing the end of their runs. A lot of the push for REITs has come from the declining interest rate picture and he doesn’t see interest rates going any lower.

Unknown
COMMENT

Real estate in general is driven by interest rates. Very, very well-run company. Real estate space has been very good to investors recently.

property mngmnt / investment
BUY

Likes what they have done in terms of their mobile platform and growing it out. This is one of 2 that he would own in the US. (He owns AT&T (T-N).) Would be careful about over concentrating in the telecom area at this time. Dividend yields a very attractive relative to long-term bonds.

telephone utilities
BUY on WEAKNESS

There are many facets to their business. He would prefer to see a little bit of weakness in the share price before allocating new capital to it. They’ll be in better stead once growth returns to the global economy simply by the nature of their businesses.

chemicals
COMMENT

Going to be really challenged from a growth perspective in the next little while. Feels the 4.58% dividend is safe.

biotechnology / pharmaceutical
BUY

Executing their business plan very, very nicely. Their retail business is quite accretive to their overall business plan. Really likes the agriculture theme going forward. Good for a long-term hold.

chemicals
COMMENT

Has been a little volatile recently, which is unusual for them. Doesn’t have any problem with the company. Picking an entry point would be his only challenge. Very good innovators and marketers. One risk would be if income levels changed and there was a substitution of fast foods and people wanting to spend more but he doesn’t see this as a threat in the next little while.

food services
DON'T BUY

He would not be at all interested in owning this one. The large money center banks in the US rely far too much on capital markets to fund themselves. In a period of relative stability, that is okay but this bank would really struggle on any stress in the banking system. Too much risk.

banks
DON'T BUY

A total turnaround story. Has actually done a little bit better recently and it looks like there are some prospects to it. The challenge with any of the European banks is the potential for significant dilution of their capital. Having to raise more capital to satisfy different regulatory requirements is very significant and very real. You could do better elsewhere.

Financial Services
TOP PICK

Primarily a US utility with most of their activity in Florida. This is interesting because of the call on renewable energy coming back in favour. Nice generating platform and a good pipeline of projects to upgrade their generating capability.

electrical utilities
TOP PICK

There is a secular growth in the industry and this one is fairly uniquely positioned. They are a manufacturer for many of the designers of these products. Also, a number of fabricators are outsourcing their fabrications to them. Very good market share. Good dividend yield and thinks it will grow 3.5%-3.6%.

electrical / electronic
TOP PICK

This is a franchise that is growing very, very nicely from a same store sales perspective. Well managed. 6.6% dividend.

investment companies / funds
N/A
We are going to see this volatility over the next little while. Things are cheap here compared to where they will be over the next couple of years. Investors should be patient and look for periods like to day because opportunities will be created. Thinks Greece will withdraw. He has a lot of fixed income investments so that he can move into equities when the time comes. He likes companies that do business in all parts of the world. He has tilted to the Asia pacific realm. Growth in the US will be constrained.
Unknown
BUY
Has not had a good month. But there is not much behind that from a business perspective. They should actually have some pricing power because of a lack of supply of their chips. He is looking to top up his position
electrical / electronic
WATCH
Going to be somewhat cyclical. Not sure if this is the time to be buying a cyclical stock.
other mines
BUY
Domiciled in Italy. Facilitating company. Higher end sunglasses. Margin might be difficult to create. 75% of revenue from US. He would add it for new clients.
biotechnology / pharmaceutical
WAIT
It’s the kind of stock people are cautious about due to the degree of economic uncertainty out there. Market things guidance is perhaps a little robust. But they have a history of being able to grow their business. He is not big on technical analysis but the fact that it is below the moving averages, there is no rush to buy the stock but if it comes back up, through them then perhaps there is.
machinery
DON'T BUY
In two very, very difficult lines of business. Banking and Insurance. If he were to look at it, they are primarily a deposit taking institution, which is good. A benign chart speaks well of the business.
investment companies / funds
DON'T BUY
Has had some production issues and he would struggle to own it. Looks for business with diversification and sustainable cash flow capability.
oil / gas
DON'T BUY
Such an interesting company. Concern is that they have to continue to innovate. They have shown no signs that they can’t. But he prefers to own stocks that don’t have to continue to innovate to succeed. He likes the chips and Microsoft.
electrical / electronic
PAST TOP PICK
(Top Pick Nov 22/11, Up 17.43%)
merchandising / lodging
PAST TOP PICK
(Top Pick Nov 22/11, Down 5.47%) Commodity space has taken the brunt of the sell-off. Likes equities in the space that pay dividends. RDS pays a dividend. Has not performed as he likes but he would buy it for new clients at these prices.
integrated oils
PAST TOP PICK
(Top Pick Nov 22/11, Up 9.80%) Videotron 6.875% bonds maturing July 15/21.
Unknown
TOP PICK
Growing market for bikes in China and in the growing world. Dividend at 4.5%. Industry leader.
0
TOP PICK
7.3% Dividend, sustainable, very stable business.
merchandising / lodging
TOP PICK
Utility primarily in Hong Kong, but it’s cheaper than Canadian power companies. Regulated business but regulators are reasonably favourable. Growth in the stock and reasonable dividend. ADR in New York.
electrical utilities
COMMENT
Markets. US economy is functioning a little better than it was coming out of 2011. People should not forget that there are still some rough patches ahead, but there is no reason to be overly pessimistic. Europe has addressed to a degree the short term bank liquidity side of things and are starting to talk longer-term fiscal European issues and the structures they need to change. It will take a long time to reform European politics. Doesn't think Greece is that relevant in the long-term theme of things.
Unknown
COMMENT
Car industry has recovered a little bit off the lows, but certainly isn't back to trend growth and doesn't think it will be for quite some time. Honda is relatively well positioned relative to Toyota (TM-N) and some of the North American manufacturers. Likes their motorcycle division and its margins. Has a little bit better product mix than Toyota. If your portfolio is not heavily weighted toward cyclicals and things that require robust economic growth, then you could add this and be comfortable.
Automotive
BUY
Just made a new 52-week high. In the tech space there is reason to be a little bit constructive. A lot of companies have held off on their spending over the 2008-2009 period. There is a pent-up demand that will possibly be satisfied over the next little while. He prefers Taiwan Semiconductor (TSM-N).
electrical / electronic
COMMENT
His preference is BHP Billiton (BHP-N) but there isn't a whole lot to choose between the 2. Commodities will still probably struggle over the next little while. If the portfolio is not over weighted with this type of holding, he would have no problems in owning.
other mines
COMMENT
Anything to do with France at this time, and particularly with this company, will be heavily weighted by what happens in France and you need a longer time horizon than 1 year. Telecom space is pretty solid at this stage. Balance sheets are good and dividends are reasonable.
Utilities
COMMENT
Recently cut their dividend and there is risk of another cut. Their Latin American operations aren’t growing quickly enough to offset what is going on in Europe.
telephone utilities
COMMENT
Still reasonably cheap. Have strong properties and have leveraged them very well. Considers it as a bit of a defensive play.
entertainment services
COMMENT
Has done a very good job of developing foreign markets and a significant portion of their exposure comes from outside of Europe. However, they do have a relatively high concentration of their business in Europe still, which is not the best regulatory environment for mobile or phone company. A reasonable holding but he prefers others.
Telecommunications
DON'T BUY
Doesn't feel they have executed brilliantly. He owns, but is not keen on adding to at this time.
specialty stores
DON'T BUY
The commodity complex is a little bit under pressure at this time. The growth phase of the economy at this time, he wouldn't be concentrating exposure to it.
Mining