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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
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