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Stock Opinions by Brandon Osten

N/A

Markets. Non-Financial and Non-Resource N.A. equities are today’s topic. We had a very large run in the US since 2009. A lot has been a lack of alternatives. The Fed squeezed you out of bonds, so money flowed back to equities. After 2008's experience, people may move back to bonds for only 3%. He thinks the money flows into equities are gone and now companies are on their own. He always does bottom up. He is worried that the economy may not be as strong as people think based on fast earnings in big blue chips.

Unknown
DON'T BUY

They’ve done a great job, but it may be hard to create profitability. It is a challenge that they may not exist in 10 years. You could enter if it got to liquidation value.

specialty stores
HOLD

Good dividend at 5.3%. Cap-X level is high but there is good cash flow. A very defensive sector. It is going to grow over the long term.

Telecommunications
N/A

Canadian Dollar. In the short term the Canadian Dollar will not do as well against the US with oil at $110, but he is bearish on oil long term. It won’t go back to par, however.

Unknown
HOLD

Fairly non-cyclical. You will always get good pockets of growth. But this one is stagnant. Nokia was not a good idea. He is concerned with the 10s of thousands of employees they just picked up. They are challenged and it is well known they are. Sees a low level of growth. 3% dividend. Be prepared to hold it for 3 years after the new CEO turns things around.

computer software / processing
HOLD

7%+ dividend means it is not dead money. A very high quality REIT. The entire sector has come under pressure. People worry about how they can roll over mortgages over time. Smart management team. Being paid to wait. He would wait because over the long term it will probably be up.

property mngmnt / investment
DON'T BUY

4% dividend is good, but not great. A few acquisitions were put together. But he does not like the cigarette business. Too many laws working against you and getting worse. There is a trend toward people getting healthier. It has a beta of 1 so it may not be that defensive. Not a lot of growth potential.

tobacco
PAST TOP PICK

(Top Pick Jan 24/13, Down 8.99%) He got out somewhere in the mid $40s. Same store sales were not coming in where he wanted them to come in. There is some question as to how the CEO can pull strings to get one company to help another. Likes it over the long term but he stays on the sidelines for now.

0
PAST TOP PICK

(Top Pick Jan 24/13, 5.28%) Pretty good dividend. He recently bought more. Recently had a setback that will delay some growth. He would still own this. Dividend is safe. Could see dividend move up in 24 months.

wholesale distributors
PAST TOP PICK

(Top Pick Jan 24/13, Up 1.75%) He is happy with the 30% he has received and questions above return calculation. Thinks it will continue to move up as they prove out their asset.

oil / gas
DON'T BUY

Historically he has not been a big fan because he has not seen a big creation of value. And he is not that bullish on global infrastructure.

transportation equip & components
WEAK BUY

He is positive on the automotive sector. He thinks Eu has bottomed in automotive. He doesn’t like that GM have bad relations with their pensioners. Prefers others. He owns F-N. Better from labour relations and growth prospects point of view. Also, likes TRW, which is his favourite in this sector.

Automotive
SHORT

Caller asked what to Short. He has a number of shorts. Wal-Mart because of weak numbers and free cash flow below earnings due to depreciation.

department stores
BUY

It is controversial but he would buy it today. Thinks they will regain market share. They ARE the PC business. There is not a lot of market share to lose in that area. At some point PC sales will stabilize. They have a rich dividend. Don’t count them out yet. There are better places to be, but he would hold it.

electrical / electronic
RISKY BUY

12.6% dividend. An interesting company. In dispute with AC.A-T, their only client. They can’t get out of contract for 6 years. If it is resolved in favour of CHR, it will go up, otherwise it will pull back. Thinks they will kill the dividend in the later case. There is a better way to play it. They have a convertible bond with 9% coupon, due in about a year. If the decision goes against them they could still make good on the bond.

Transportation & Environmental Services
HOLD

Assumes deal will go through. No one was expecting this. SC is Loblaw’s way of getting into the neighborhoods instead of just having their big box stores. They bought a quality asset at the perfect time. Wal-Mart might have done it. Take the L-T shares when the deal completes.

specialty stores
BUY

A good company, defensive, good dividend but no potential catalysts. Over time it will grow. Clean pension plan and low beta. You can hold for the long term.

environmental
DON'T BUY

Analysts are starting to come around to where they are. About 10 times earnings. Making a lot of acquisitions to keep up. Not sure how sustainable this approach is. Good balance sheet, but it doesn’t look cheap. There are better places to be.

electrical / electronic
TOP PICK

No one has recognized them for what they have. They are held back because some of their billing cycle works a year in arrears. As listings come up it will benefit them. Have close to a billion in tax losses so someone could buy them and thinks that will happen.

communications / media
TOP PICK

Market leader in orthotics and prosthetic space. Medicare slowed down their billing cycle. Now 95% of questioned transactions have gone through. 10 times market share of nearest competitor. Solid growth (organic). It is currently below the radar. He has owned it for years and recently bought more.

Consumer Products
TOP PICK

You want the ‘A’s because of higher dividend. Dominate their industry. Insurance claims. There is always some disaster happening. Not as liquid as the ‘B’s so you have to be patient.

other services
N/A

Markets. Lenovo would have to offer a premium for RIM. The risk is that they don’t buy it. It is a bad omen because they are the garbage collectors of high tech. If it doesn’t get taken over then he is very negative on the prospects of RIM. He is trying to find back door plays on a US housing recovery play where the price is not in the stock. Prefers US equities over Canadian but because he is not bullish on copper oil or gold. Thinks they will be done with Chinese infrastructure in 2016.

Unknown
BUY

It has been tough. Management lost credibility. But the stock is cheap and tech infrastructure is rebounding. The rollout of LTE and need for greater bandwidth will drive them. CSCO allows telcos to take their time in filling up bandwidth. He ignores the street right now.

electrical / electronic
HOLD

Prefers POT as their earnings and visibility are more predictable than this one.

chemicals
SELL ON STRENGTH

They are so dependent on big contracts and the space is so competitive and so tricky. He would sell it if it got up to $2.

computer software / processing
BUY

Would switch into TRW. Automotive is a good place to be right now. They supply to OEMs. Is very volatile, difficult to hedge. Under levered balance sheet. A large position for him.

metal fabricators
DON'T BUY

12.3%. Well known secular decliner. Sales declines are starting to accelerate. It is cheap, but the problem is that they have debt. They make their money on postage.

electrical / electronic
DON'T BUY

There is a lot more upside to go, but he is not a fan of the acquisition they made, nor is he a fan of the space. Not particularly interesting. Could be a short term increase.

consulting
TOP PICK

Good dividend while you wait. Have a tight window between when they buy and sell the propane.

wholesale distributors
TOP PICK

Dry gas and liquids. Just completed a joint venture. Bought more recently. Nat gas will be in the $5 range in two years.

oil / gas
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