Stuart Hinshelwood

Markets. Expecting some choppiness in the US in the next several months. Economic data has been weak. Housing numbers are not very good. Auto sales have been a little bit weaker. We are kind of back to record levels in the S&P and in order to get that market to move higher, we need to see economic data that confirms we should be paying these types of valuations. The market might just trend sideways until we see these kind of numbers in the next couple of months and what we see coming out of emerging markets. Does not want exposure to certain emerging markets right now. There is a lot of risk right now on the credit side. Has been a lot of growth through credit and that has to unravel. From an economic perspective, emerging markets have inflation and growth problems, which they are combating by putting interest rates up which he feels is a poor policy. Also, doesn’t want to be overweight Europe relative to the US.

Owns a pharmacy benefits manager (PBM), sort of the back end of the business as well as a retail storefront. With the changing landscape in healthcare, they have a really nice runway into earnings over the next couple of years. From the PBM side you are going to pick up on the drugs, but also the management of the plans that come to them as there are going to be more people under coverage now and they will have choice of coverage and this company will be relevant to them. Just reported a nice beat in earnings and have reaffirmed their guidance. Yield of 1.57%.

Management team seems to be exceptionally strong. Bought a number of companies over the last couple of years and just completed a big acquisition in Germany which makes them a big, significant, generics distributor in Europe which will be accretive to earnings. Looking out a couple of years, he could see $11-$12 in earnings. Very, very good at execution. Yield of 0.54%.

Organic growth in large cap pharmaceutical companies is something like 2%-3% and in order to offset that, they sell non-core assets and put that money back in their pipeline. This company’s pipeline has Prevnar which they are going to use in adults, as well as a breast cancer drug. These 2 drugs combined he feels are somewhere in the $2 billion range over the next couple of years. Feels the stock is worth $35-$36 on an analysis basis. Yield of 3.25%.

Growth in large-cap pharmaceutical business is fairly anaemic. There are not a lot of great growth prospects. What he does like about this company is that they have a medical technology business, a nutritionals business as well as a traditional pharmaceutical business i.e. all the components of the healthcare sector. Feels there is some growth from an earnings perspective. (See Top Picks.)

Yahoo (YHOO-Q) versus Google (GOOG-Q)? Google has 60%-70% plus of market share in terms of Search and is clearly the dominant player in the space. On ad based revenue growth, they been able to grow and currently have a new “enhanced campaign” for targeted marketing. Yahoo is getting beaten out by Google. If you want to play search, growth in mobile and ad revenues, Google is the one to play.

Feels there is a trading catalyst to own an airline here. There has been some consolidation in this space. Traditionally these are not well run businesses but there is less capacity now, fuel is moving up and surcharges can be passed on. If they can manage those earnings and can guide the street conservatively, a case could be made for them. If you start to see passenger trends roll over, it would probably be time to sell.

Yahoo (YHOO-Q) versus Google (GOOG-Q)? Google has 60%-70% plus of market share in terms of Search and is clearly the dominant player in the space. On ad based revenue growth, they been able to grow and currently have a new “enhanced campaign” for targeted marketing. If you want to play search, growth in mobile and ad revenues, this is the one to play.

Just reported and numbers were essentially in line from an EPS standpoint. Revenues were at little bit lighter than expected. This is a business that has a significant exposure to foreign exchange and has a large EGM business. Both of those businesses are under pressure and there is little they can do about it. The next thing this company needs to do is to buy a snack food business.

Doesn’t like the market they sell into. This seems to be a market that is completely dominated by price. It is a volume purchaser. Likes the Costco Wholesale (COST-Q) model much better where it is a membership-based business. Has been stuck in the $73-$75 range for a while, because there is not a lot of top line growth. They’ll have to do acquisitions.

He would tend to be a seller of this. Nothing wrong with the company, but you’ve got the deadlines coming up where the transition is going to take place in their business and then they’ll be flush with cash and what are they going to do with it. Thinks you can get this back in the $33-$34 range.

Likes life insurers in general. Fundamentals in the business have improved and have recovered a significant amount from where they were 2 years ago. At this level, the stock is probably just going to go sideways.

Has been one of his favourite railroads. Very solid management team. Stock had a big run, corrected and came back down to the 200 day moving average giving you a good opportunity to Buy. Thinks the coal headwind is understood but doesn’t mean there is not additional downside. If you believe that the US economy is going to continually grind forward over the next 2 years, this rail moves all kinds of housing related products, auto products and with a cheaper Cdn$ they bring lumber down from Canada.

(A Top Pick April 19/13. Up 18.39%.) Still likes. As energy stocks sold off coming into the new year, they were pressured like everybody else. Earnings were somewhat mixed. Valuations are still reasonable, especially since the stock has pulled back.

(A Top Pick April 19/13. Up 21.37%.) They have a railcar business, healthcare technology business, 25% of revenues exposed to energy on the services and pipelines side. Have run off the capital side and earnings are naturally going to be lower. What people miss on this is that it also brings down risk exposure.