Lorne Steinberg

Increasing number of stocks assume growth trajectories that defy logic. Some of the large cap tech stocks are in this camp. Huge difference between a great company and the price it's trading at. For example, look at Shopify. Amazing Canadian success story, brilliant management, fantastic execution. One has to assume a spectacular growth rate for the next decade to justify the share price. No margin of safety if things don't work out perfectly. Utilities as well. Depend on central banks keeping interest rates where they are today, and relying on investors to keep on buying bonds at 2% or less. Consumer spending is starting to accelerate. Governments remain in spending mode. Suggests Fed will start tapering next year, and investors buying bonds are going to expect higher yields. This will put pressure on the pricier parts of the market.

Transitory vs. durable inflation. He doesn't expect any long-term, huge inflationary pressures. If inflation goes back to 2%, investors will simply require a 10-year treasury yield of 3%, and this will put pressure on valuations.

Are FANG stocks must-own? He doesn't put the FANGs in the dot.com basket of crazy stuff. At the end of the day, the value of a business is a function of its financial stability and long-term earnings growth. There's a price at which it makes sense to buy that stream of cashflow, and a price at which it doesn't. Some of those companies are not wildly expensive, but few of them are really cheap. So he doesn't "have" to own anything. If you pay too much for something, it's going to be hard to generate a good return.

A gas and utility company that's generating more and more from renewables. 4% dividend yield is attractive in a low bond yield environment. Low GDP growth at best. A decent company. Not a bad place to be for income in euros. If yields start to rise, all the utilities will be under pressure.

High-end beautiful stuff. Brand has suffered and in desperate need of a turnaround. Buying a fashion brand on the hope of a turnaround is a pretty big bet. Better companies in the sector such as LVMH.

A company from yesteryear. Revenue coming from firewalls, so revenues are stagnant. Great margins and cashflow, but lots of competition. Need to reinvent themselves. He'd pass.

Crop science company, competing with Monsanto but without the social issues. Phenomenal R&D. Unique products. Huge impact in emerging markets. Helps with food security. Very well run, great cashflow generator, pretty good earnings growth. His pick in the sector.

Had owned, took profits. Disappointed that it stuck to its knitting making chips. Losing market share. Stock's fallen and he'd take a look if it fell more, but it's a show-me story. Bought TSMC instead, the largest outsource manufacturer in the world. TSMC has much better growth.

Largest outsource manufacturer in the world. TSMC has much better growth than Intel.

All insurers have suffered from the flat yield curve. Bond yields picking up is bullish for all financials. It's been in the penalty box since the financial crisis and a few stumbles. Getting paid to wait. Good risk/reward. Has to prove that it can deliver and execute as SLF does.

Banks vs. lifecos. Banks are the heaviest weighting in his dividend strategy. Canadian banks are protected from competition. We have immigration, so we're a growth economy. Insurance companies offer diversification, so he likes that sector. But Canadian banks are uniquely positioned.

Banks are incredibly well positioned. They're over-capitalized, so they have tons of room to raise dividends and buy back shares. Rising rates are extremely bullish for bank earnings over the next 5 years. Whole sector is poised to benefit. JPM is great. He owns MS and GS.

US banks. Investors have to look at the world on a long-term basis. When the Fed comes out with a surprise rate hike, or even a surprise announcement, the market can easily correct. Banks are incredibly well positioned. They're over-capitalized, so they have tons of room to raise dividends and buy back shares. Rising rates are extremely bullish for bank earnings over the next 5 years. Whole sector is poised to benefit. JPM is great. He owns MS and GS.

Rules are different for Chinese and EM stocks. 20% earnings growth. Premier Chinese e-commerce company. Incredibly cheap. Risk is more government intervention. At current valuation, looking out next 5 years, upside seems to outweigh downside, if you can handle the volatility.

(A Top Pick Jul 22/20, Up 46%) Driver remains the insurance operations, which will benefit from rising rates. Suffered in 2020 with a couple of acquisitions, though earnings are starting to rebound. A core holding. Still excellent value.