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Stock Opinions by Christine Poole

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

The S&P 500 is outperforming the TSX. The TSX is down quite a bit today, led by energy. Whereas the S&P has been very resilient, all-time highs, up double digits, though very narrowly led by large-cap tech stocks.

What the Fed said yesterday, suggesting only 1 rate cut this year, was not really surprising. To her, it was reassuring that they still see a path to inflation going down. Unemployment is around 4%, and they don't see that deteriorating too much. Interest rates will trend down over time, as long as inflation does also.

Unknown
COMMENT
Canada vs. US -- work harder to find Canadian opportunities, or just skew more to US?

In her growth portfolio, she has just over 50% outside Canada. This year, energy has not been working and oil prices are range-bound. It's anticipated that we'll be in an oversupply situation by 2030. 

Plus, the Canadian economy is underperforming the US economy. Unemployment here is 6.2%, up a lot from the 4% low. That's all impacting the banks, which form a large part of our index. So sectors that are big weights in our index are holding it back.

While there are some Canadian growth stocks, not as much as in the US because our tech sector is so small, and tech is what's been leading the market for the past year.

Unknown
COMMENT
If cut rates when market's at or near all-time highs, what does that do to the market?

Rate cuts in Canada would help our economy, and it will help the banks. In the US, if the first one doesn't happen until the end of this year, she doesn't know if that will make much of a difference. 

What we want to look for, when the cut does happen, is the impact on sentiment. Corporations are going to be more comfortable with the rate environment, which they'll see as more stabilized. If it's a soft landing scenario, and the economy does continue to grow, over time that's going to be beneficial for corporate profits.

Unknown
COMMENT
Corporate earnings are, and expected to continue to be, a positive story?

Yes. Even in Canada, earnings are expected to be up. In the US they're much stronger, again, led by tech stocks. If we have that profit growth, that's supportive for the stock market.

Unknown
RISKY
Celestica Inc
Bought at $64, now $77.

Nice run. An AI play on data centres. Very aligned on spending of hyper-scalers like AMZN, MSFT and GOOG. Margins quite low, around 5%. But getting volume on very strong demand. Momentum stock. 

Future growth and success predicated on capex spending beyond 2024, which hasn't been announced. Be cautious. Once growth rate starts to turn, stock will pull back.

electrical / electronic
HOLD
Walt Disney Co.

She's going to keep holding for now, unsurfaced value. Confidence in Bob Iger, he knows how to make deals and focused on making streaming profitable, which it will be by end of September. Post-pandemic growth in parks is moderating, still generates lots of profit.

entertainment services
HOLD

Likes the rail industry, essentially an oligopoly, can't replicate rail infrastructure. A "soft" cyclical -- pricing power, transports diverse goods. Synergies and cost savings from acquisition. Even though economy is slowing, they carry necessary goods, so OK as long as not an outright recession. You can hold rails through the cycle. She owns CNR.

Transportation
BUY

Likes the rail industry, essentially an oligopoly, can't replicate rail infrastructure. A "soft" cyclical -- pricing power, transports diverse goods. Even though economy is slowing, they carry necessary goods, so OK as long as not an outright recession. You can hold rails through the cycle. She's been adding.

Transportation
COMMENT
Will change to capital gains inclusion rate put downward pressure on TSX?

If it does, it's short term. Don't let it influence what you do in the stock market, you have to take a long-term view. If there is some profit taking or selling before June 25, then take advantage and buy some good companies. In general, just ignore the short-term noise. Her own clients haven't been stressing about the change.

Unknown
BUY
Enbridge
Dividend sustainable?

Yes, it is. She owns it for attractive yield of about 7.5%. Backlog of projects supports the dividend, company feels it can grow by 3-5% annually for the foreseeable future. Diversifying end market by purchasing nat gas utilities. Rising interest rates and equity issue have held stock back. Trans Mountain has not affected takeaway capacity.

Volatility in the underlying commodity shouldn't affect pipelines that much, but it does impact sentiment.

oil / gas pipelines
HOLD
TC Energy

Cost overruns of Coastal GasLink largely behind them. Interest sensitive. If rates start going down, should be a tailwind. Her preference is ENB.

oil / gas pipelines
SELL
Envista Holdings

She sold. Late to the game in launching a clear liner in lieu of braces. Slowdown in economy and household income means dental visits get cut. She misjudged how cyclical dental industry can be, not everyone gets coverage. Russian business hurt, China slowed, Israel manufacturing disrupted. Don't buy the dip.

Healthcare
RISKY
Eli Lilly & Co.
Another all-time high today, but the party will eventually end, especially when drugs go off patent.

Has done very well on weight loss, plus favourable news on Alzheimer's drug. Hard to buy, especially as a value investor, as it keeps going higher. Trades over 60x PE. Lots of momentum. Expectations very high. History has shown that it's really hard for companies to sustain really strong growth rates for consecutive years and to continuously ramp up margins. Competition always comes in.

She's not a technical fund manager, but if there's a big pullback, you could use technicals to look for an entry point. Have to consider your investment horizon.

biotechnology / pharmaceutical
PAST TOP PICK
Fortis Inc.
(A Top Pick Jun 13/23, Down 1%)

She's buying here. You always want to allocate some part of your portfolio to a defensive stock like this. Not the highest yield, but attractive, under 4%; increases it annually by about 5%. Longer term, has outperformed TSX. Holding for any AI play is way down the road.

electrical utilities
PAST TOP PICK
(A Top Pick Jun 13/23, Up 9%)

Higher interest rates saw weaker funding in biotech. China had weak demand, though only about 8% of revenues. Still likes it long term for a picks and shovels play.

electrical / electronic
Showing 1 to 15 of 4,109 entries