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Stock Opinions by Stan Wong

COMMENT
A Comment -- General Comments From an Expert
Markets.

He and his team are fairly constructive on equities going forward. Today is a less exciting day, but he's still positive at least for the NASDAQ. Now that the uncertainties around US election are behind us, as well as the typically volatile month of October, we set up pretty nicely for the near term. If you look back to 1950, the next 3 months (November, December, and January) tend to be the strongest 3-month segment of the year. The average return in that timeframe is 4.4%.

The US economy had 2.7% real GDP growth in Q3, pretty solid. Driven a lot by durable sales, inflation down to 2.4%, unemployment down to 4.1%. No signs of recession in the US, which people were worried about a year ago. Now we have more dovish central banks around the world with a path of lower interest rates.

US corporate earnings are forecast to be about 13% for 2025, 11% for 2026. Equities are going to move based on corporate earnings. 

Unknown
COMMENT
Did Q3 represent a trough in earnings growth?

It could be, especially with the new administration in the US being more business-friendly and in favour of tax cuts. Also in the US, money market assets have hit a new record high of $6.5T, lots of dry powder.

Unknown
COMMENT
Favourite US sectors.

Some of the sectors that will do well under a Republican administration: financials, industrials, healthcare, and technology.

When you look at healthcare, there are good growth aspects in many parts of the sector. More of a value play. Of course, there will be rhetoric about what names will be hit by potential government action. Remember that there's a difference between candidate Trump and President-elect Trump.

Unknown
DON'T BUY
Uber

Right at potential support of 200-day MA, which makes it somewhat interesting. 33x forward PE, 40% growth rate, so the valuation looks interesting. Ride-sharing market is highly competitive. DoorDash + LYFT could be a headwind. Long term, he worries about autonomous vehicles and increased government regulation.

Technology
WATCH
Eli Lilly & Co.

He continues to hold. 35x forward PE, 20% growth rate. Earnings and guidance somewhat disappointing. Long term, tremendous growth in obesity-treatment market and diabetes. Short term, watch technicals. Dipped below 200-day MA, but up $13-14 today. If it bounces here, may be attractive for new or additional money.

biotechnology / pharmaceutical
BUY

Generally, energy is a beneficiary of a Trump administration. Value in the energy market, given where oil prices are. Going forward, some of the US names may perform a bit better than Canadian names. If we avoid a recession (his view), then oil prices can move higher. If fiscal stimulus in China can push that economy, would benefit oil prices.

Yield is ~4.6%, no risk to that. Attractive name to own as part of your portfolio.

oil / gas
BUY
Chubb Limited

Clear channel of higher highs and higher lows from mid-2022. Upward trend in the 200-day MA is starting to accelerate. Sees 7-8% earnings growth. Not as exciting as NVDA, but a good financial name  to own. IFC is the comparable in Canada.

Likes this segment in P&C. Represents value. Will do well in falling interest rate environment, though some interest rate yields moving higher, which has affected this type of name. 

insurance
BUY
Intact Financial

Likes this segment in P&C. Represents value. Will do well in falling interest rate environment, though some interest rate yields moving higher, which has affected this type of name. 

insurance
DON'T BUY
BCE Inc.

In general, telcos are a tough area right now; earnings growth is weak. Investors are in wait-and-see mode. Yield is now 10.4%, lots of questions whether it can stay there. Management did say dividend won't increase, but did not say it would decrease and this is a positive sign.

telephone utilities
DON'T BUY
Smart REIT

With 10-year bond yields popping up, some of the REITs are a bit challenged. This is a Canadian REIT, even though WMT is its anchor tenant. He prefers storage REITs in the US. He worries about the Canadian economy. Yield looks strong at over 7%, seems safe.

investment companies / funds
WAIT
Celestica Inc

Probably overbought here, up 240% in last 12 months. 21-22x forward earnings, 15-16% EPS growth rate. Not really expensive. Likes it.

electrical / electronic
PARTIAL BUY

70% in US. Some of top names:  NOW, BABA, ORCL, CSCO. A bit different from your normal AI ETFs. Tech names in general are a bit expensive at this stage of the cycle. Trades at almost 4x price to sales, and almost 41x PE. He'd rather be selective in the space. Still, a small portion can make sense. 

MER is ~68 bps. Seems to be equal weight, rather than market-cap weighted.

0
WEAK BUY

Broad basket of equities and fixed income. The one thing to keep an eye on is the bond portion. If we start to see inflation rear up again (because of US spending and tariffs), you might want to take your bond duration down, which you can't do with this ETF. Yield ~4.25%.

E.T.F.'s
PAST TOP PICK
Alphabet Inc
(A Top Pick Nov 16/23, Up 30%)

Still loves it. Should be a beneficiary of new Trump administration, with fewer concerns about DOJ breaking it apart. Trades at 20x forward PE, 16% earnings growth rate, which means a 1.25x PEG ratio and that's fairly cheap in its  space. Q3 beat on top and bottom. Ad revenue and Search remain solid. Chart's on a clear uptrend.

Technology
PAST TOP PICK
McKesson Corp
(A Top Pick Nov 16/23, Up 34%)

Earnings today impressed the market. Trades around 16-17x forward PE, 11-12% EPS growth rate. PEG ratio is 1.4x, pretty good. Great, long-term secular growth name. Few competitors plus 33% market share means substantial pricing leverage.

wholesale distributors
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