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Stock Opinions by Greg Newman

COMMENT
S&P 500 euphoria?

Almost at 5,000. This is a big moment. He remembers at the start of his career, the Dow broke through 10,000 in 1998, hats on the floor and everything. It's the old story, where the Magnificent 7 or the top 10% of stocks are really contributing to most of the rally, and a lot of stocks are not participating that much.

Unknown
COMMENT
Appeal of the mega-tech.

Capital light, excellent free cashflow. Even though they were doing the heavy lifting for this rally, they were very soberly priced. Not AAPL, but META, GOOG, AMZN. 

Since the latest run over the last 6 weeks, they aren't as generously priced as in the previous 3 months, but they're not crazy. AMZN, for example, is 28% growth rate, trading at 30x, PEG ratio is a bit higher than 1, but still OK. Even names like NVDA still make sense.

Unknown
COMMENT
PEG ratio explained.

The growth rate of a company compared to its PE multiple. Under 1 is desirable. Near 1 is fine. If you have the growth rate, slightly over 1 is fine, too. So a 20x multiple's OK if a company's also growing profits at 20%.

Unknown
COMMENT
Could be more disappointment over timing of interest rate cuts?

For sure. Market started out thinking there would be 6-7 cuts in 2024, and now it's down to 4-5. He thinks it will be more like 2-3.

Inflation will go down to 2%, that's the good news. But it's going to take a few years. This market is the reciprocal of what it was in October 2023. Then, people were positioned for a recession, leaning towards fixed income, under their asset allocation for equity. Now the crowd is very ebullient and looking for the next moves. 

We have a reasonable chance of some sort of selloff here, given all the optimism. It's really hard to see that big of a selloff when you have US earnings being so good, and inflation coming in line, even if rates don't come down aggressively.

Unknown
WEAK BUY
Hudbay Minerals

High USD hurting copper prices. Sputtering China. Recession fears. Capex for recent acquisition higher than anticipated. Copper market really tight. Starting to get debt under control. Decent valuation around 10x 2025 earnings. 

If copper hits $4 in 2024, and $4.50 for 2025, sees them growing well at 62%. Under-owned, perhaps its time has come.

precious metals
COMMENT
Takeover of copper mines?

All copper miners could be subject to a takeout, even some of the bigger ones like FCX. It's so time-consuming, expensive and cumbersome to build new mines, it's easier to just buy one. We need copper for the ESG revolution.

Unknown
BUY
Gibson Energy

Upcoming quarter may be soft due to weather and softer commodity prices. Legacy businesses doing well, opportunity to grow. Can fund growth with cashflows in second half of 2024. Reasonable at 11.6x compared to peers. Nice dividend of 7%, sober payout ratio, good balance sheet, low debt. Models 7.6% EPS growth.

pipelines
BUY
Cenovus Energy

With energy companies, you really have to be comfortable with commodity price and OPEC manipulation. Oil prices seem to have settled, nat gas prices soft. Compared to peers, it's cheaper, better production growth and cashflow growth. Pretty good deal here. Slower debt reduction is not of much concern with current oil price.

oil / gas
WAIT
BCE Inc.
TD vs. BCE for capital appreciation, plus attractive and sustainable dividend?

BCE beat, raised dividend, but free cashflow problems and layoffs. Dividend is really good. Will probably go to $48 before all is said and done. When there's bad news, stocks take a while to fully bleed out. Doesn't mean there isn't good value here from a dividend point of view.

For TD, banks are a tougher story due to capital ratios and inability to grow. Best balance sheet, due to failed takeover bid in US. Between the two, he'd pick this one right now. But instead of a bank, look to MFC or SLF.

telephone utilities
WEAK BUY
Toronto Dominion
TD vs. BCE, for capital appreciation, plus attractive and sustainable dividend?

BCE beat, raised dividend, but free cashflow problems and layoffs. Dividend is really good. Will probably go to $48 before all is said and done. When there's bad news, stocks take a while to fully bleed out. Doesn't mean there isn't good value here from a dividend point of view.

For TD, banks are a tougher story due to capital ratios and inability to grow. Best balance sheet, due to failed takeover bid in US. Between the two, he'd pick this one right now. But instead of a bank, look to MFC or SLF.

banks
BUY
Manulife Financial

Banks are a tougher story due to capital ratios and inability to grow. Instead of a bank, look to MFC or SLF.

insurance
BUY

Banks are a tougher story due to capital ratios and inability to grow. Instead of a bank, look to MFC or SLF.

insurance
BUY
Brookfield Corp

Likes the stock. Underperformed. BN and BAM are closely correlated. BAM just reported, increased dividend, a nice beat that some are saying merely due to taxes. He models outsized growth for 2024. Pretty attractive risk/reward. 22x, 17% distributable EPS growth. Buying at these levels will work.

investment companies / funds
BUY
Stock, plus longer-dated call options.

Just reported, increased dividend, a nice beat that some are saying merely due to taxes. He models outsized growth for 2024. Pretty attractive risk/reward. 22x, 17% distributable EPS growth. Buying at these levels will work.

Don't need to buy long call options on a company like this. BAM has at least a 3.8% dividend. Collect that instead of paying the premium on options.

0
HOLD
Enbridge

Really good dividend. Yield companies have fallen as interest rates have gone up, real headwind. Reasonable valuation. More expensive than TRP, but with a better growth rate. 5% EPS growth, 15x 2025, boosted dividend. Don't add right now. A name like this can give you defensive qualities if markets go bust, as ENB probably won't do down that much from here.

oil / gas pipelines
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