Lorne Steinberg

It's really been a tale of two markets. Large-cap tech stocks are dominating everything, and investors have completely forgotten about 95% of the S&P 500.

We've seen this before, where diversification has become a dirty word -- "Just give me more NVDA." Even though markets are at all-time highs, there are so many great companies that have lagged badly over the last number of years and that offer compelling value.

The message is very simple, and he's been doing this for 35 years. Nothing stays cheap forever, and nothing stays expensive forever. If investors forget about earnings, cashflow and so on, and simply buy what's going up, it usually does not end well.

This is not to suggest that MSFT and NVDA and others are not phenomenal, free-cash flowing businesses. It's just that a lot of them are priced for perfection and don't offer the same value they did several years ago.

His answer is that people need to be long-term investors. Warren Buffett has said that even if he knew there was going to be a recession tomorrow, he wouldn't sell anything that he has. These companies have been around for so many years. If you bought them years ago, you'd have had great performance, growing dividends.

That's always been the message. If you wait until the first rate cut happens in the States, if you wait until things turn around, these stocks have already rallied.

He's been buying. His focus has been trimming things that have been doing extremely well and aren't as cheap as they were. He's always looking for great companies on sale.

Sure, and the host works for one of those companies, because BCE is up there. His view is very simple. Interest rates will soften up, though they'll never go back to levels we saw before. 

The economy is slowing, consumers are reacting to higher interest rates, so rates will be cut a few times. Once again, investors will say, "Hey, what about dividends? I'd forgotten about those over the last few years." He expects to see a rally -- certainly in Canada which is more interest-rate sensitive with banks, telcos, etc, and even south of the border.

One of the things he looks at is sustainability of dividends. Are you paying your dividends through free cashflow? WBA cut its dividend not that long ago, and they've struggled ever since acquiring Boots in the UK a decade ago.

Need to focus on those businesses that still have growth, generating consistent free cashflow, and covering dividends through free excess cashflow and not getting themselves into trouble.

One of the things he looks at is sustainability of dividends. Are you paying your dividends through free cashflow? Cut dividend. Struggled ever since acquiring Boots in the UK a decade ago, which has crippled the company.

He owns Loblaw, which owns Shoppers, and that's one of the reasons he likes it so much. The US is such a different market. He owns CVS, which is much more broadly diversified than Walgreens. The business is being transformed all over NA, because after Covid they found it was so much cheaper to send you to get a vaccine at a pharmacy than to go to a hospital.

US is a tough place for retail, brutally competitive. Some of these stores are in tough locations and it's likely that the company hasn't put enough money into them.

Owns Shoppers, and that's one of the reasons he likes it so much. The business is being transformed all over NA, because after Covid they found it was so much cheaper to send you to get a vaccine at a pharmacy than to go to a hospital.

Stable, much more broadly diversified than WBA. Way ahead of the curve on getting into homecare. Becoming a one-stop, end-to-end healthcare business. Generating free, excess cashflow that they're using for acquisitions without having to issue more shares. Dividend is more than secure, seeing share buybacks again.

Neither. Look at the 10-year charts, both lower today than 10 years ago. When flush with money, make acquisitions; then when things turn nasty, take write downs. Result is less than zero value creation for shareholders. The only people making money are the executives.

Neither. Look at the 10-year charts, both lower today than 10 years ago. When flush with money, make acquisitions; then when things turn nasty, take write downs. Result is less than zero value creation for shareholders. The only people making money are the executives.

Great free cashflow, more than covers the 4% yield. Cheap PE at 4x earnings. Q2 results coming out in early August, where a couple of divestitures will be announced. Awaiting stock buyback. Paying down debt, making acquisitions. $12B market cap, but not well followed.

Both are just too expensive. NVO is riding the wave of Ozempic, and already seeing a slew of competitive drugs to be released in next few years. LLY has been an incredibly well-run business. He could never buy something with a chart that looks like these, he just has to say he missed it and look for something that will generate returns for clients.

Tough thing with pharma is these drugs are massive successes, you get maybe 12 years of patent protection. Then your biggest success becomes your biggest concern as the patent wears off, and you struggle to find something else. It always happens.

Both are just too expensive. NVO is riding the wave of Ozempic, and already seeing a slew of competitive drugs to be released in next few years. LLY has been an incredibly well-run business. He could never buy something with a chart that looks like these, he just has to say he missed it and look for something that will generate returns for clients.

Tough thing with pharma is these drugs are massive successes, you get maybe 12 years of patent protection. Then your biggest success becomes your biggest concern as the patent wears off, and you struggle to find something else. It always happens.