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Stock Opinions by Christine Poole

COMMENT
US Q3 earnings up.

Bit better than expected, up 6.5% YOY. We've seen EPS revisions downwards for Q4, but they still remain positive, expected to be up 2%. That's encouraging because typically in a sharp slowdown, corporate profits turn negative. Analysts and companies are saying that, generally speaking, they expect profits to grow, and for next year to continue to grow.

We know that those profit numbers are hugely influenced by the large-cap tech stocks. Nonetheless, that's what the earnings outlook looks like now.

Unknown
COMMENT
Impact of interest rates will take a while?

Yes. We're already hearing from retailers, whether apparel or Home Depot, that they're seeing softer consumer demand. Consumers are more price conscious, putting off large projects. Those sectors are feeling that lagged impact now.

The question is how long do interest rates stay at these levels? It was encouraging yesterday that the BOC Governor acknowledged that maybe rates had gotten high enough. In Canada, GDP growth in Q2 was actually negative. Q3 numbers have not officially come out, but she doesn't think there's been much improvement since then.

We're seeing the impact of higher prices filtering through. Especially in the Canadian economy, we're much more interest sensitive in terms of our mortgage market.

Unknown
COMMENT
Pipeline and telecom yields have pushed higher.

She always allocates a portion of portfolios to income stocks like these. They've been hurt because they're interest sensitive. As rates go up, their stock prices come down and the yields go up. The dividends are very safe and should keep increasing.

But at some point, rates will stabilize. Hopefully next year some time, rates will start coming down, providing a tailwind for those stocks.

Unknown
DON'T BUY
Amazon.com, Inc.

Overspent during the pandemic, now pulling back. Jewel is AWS, which subsidizes the retail operations, as those margins are quite low at around 3%. Margins on AWS are 20-25%. Ad business is growing. She plays the cloud offerings with other names such as GOOG or MSFT.

specialty stores
HOLD
Alphabet Inc

Margins on GOOG and MSFT cloud offerings are double digit. Very profitable, generating a lot of cashflow.

Technology
HOLD
Microsoft Corp

Margins on GOOG and MSFT cloud offerings are double digit. Very profitable, generating a lot of cashflow.

computer software / processing
WEAK BUY
Danaher Corp.

Transformed from an industrial to healthcare. Life sciences, diagnostics, and biotech. Did well during pandemic. Post-pandemic headwinds, though still generating lots of cash. Attractive company, she owns TMO instead on valuation.

machinery
HOLD
Canadian Utilities

Not sure why stock's dropped. Group as a whole has pulled back because of rising interest rates. With interest rates stabilizing in the past month, stock's played catch up. Good sector for income, dividend safe. FTS is her core utility name.

electrical / electronic
BUY
Fortis Inc.

Group as a whole has pulled back because of rising interest rates. With interest rates stabilizing in the past month, stocks are catching up. Good sector for income. Her core utility name, well positioned in US and Canada. Dividend growth profile is very visible.

electrical utilities
HOLD
General Electric

Amazing turnaround. Well-respected CEO. Commercial aerospace engine business has attractive growth prospects long term.

electrical / electronic
HOLD
TC Energy

No insight on any lawsuit, but sounds political. US elections are next year, so we'll see. Lagged the group because of Coastal GasLink cost overruns, which should be behind them next year. Pipelines as a group are attractive for income. Yield's probably over 7%. She owns ENB, yielding over 7%, and PPL with a yield of over 6%.

oil / gas pipelines
BUY
Enbridge

Pipelines as a group are attractive for income. She owns ENB, yielding over 7%, and PPL with a yield of over 6%.

oil / gas pipelines
BUY

Pipelines as a group are attractive for income. She owns ENB, yielding over 7%, and PPL with a yield of over 6%.

pipelines
BUY
Morgan Stanley

Well respected, well run. Refocused on expanding wealth management, and this has done well, making the business more stable. Nothing wrong with it. She owns the well run, diversified JPM instead.

investment companies / funds
DON'T BUY
Linamar Corp

Auto parts, but has expanded into other industrial areas. Trades at a low multiple, selling into an industry where they don't have a lot of power because auto companies are so large. Well run, but too cyclical. Impacted by inflation and supply chain issues. Softening in consumer spending. Expensive transition from internal combustion to EVs.

transportation equip & components
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