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Stock Opinions by John Burke

N/A

Market.The market cares about earnings, not government policy. The numbers have been consistently good, whether they are earnings or economic numbers. Factory orders were incredibly good. Also, the housing market is starting to pick up. Earnings are good because the world economy is in unison. All the major economies are presently charging forward. There are still cheap stocks out there to buy.

Unknown
WAIT

This is now run by the same guy that was a CEO in the breakup of Tyco. He did a great job, so expectations are high. Studies show that companies that are spun off, typically do well. He would wait, because these companies are going to spend money, so the upfront pain is going to be in the first half of the year, and numbers are not going to look that good. Sometime, during that first year, he is going to look to Buy some of this.

chemicals
HOLD

Sell?This company has a very high free cash flow yield and is very profitable. Have some drugs coming off patent, but biotech drugs generally survive the loss of patents because the drugs are hard to copy. Thinks you will be fine with this in the long run. 2.6% dividend yield.

biotechnology / pharmaceutical
COMMENT

Up a little less than 40% for the year. Has done fabulously well because they’ve convinced consumers their product is the product to have. The concern is that there is nothing they make, that somebody else can’t make at half the price. The history of consumer electronic companies is not very good.

electrical / electronic
COMMENT

You have the declining paper sales. People are using iPads, and don’t need paper. On the other hand, they make packaging, and sales are going up because of Amazon (AMZN-Q) and e-commerce. Looking at earnings and free cash flow, it looks like their growth from packaging is beating out the loss of revenues from paper. You also get a nice dividend of 3.3%.

paper products / business forms
N/A

Hold a stock until the X dividend date, Sell and move into another stock, and do the same thing again?This has been done by some institutional investors, but it is tough to make it work. Once a stock goes X-dividend, it knocks the stock price down by the amount of the dividend, so you really didn’t get anywhere. Not a strategy he would pursue.

Unknown
COMMENT

Banks are levered by about 10 to 1. In the heydays of 2007, they were levered over 30 to 1, which is why many of them collapsed. A 10 to 1 leverage is a lot of leverage. They are good as long as the depositors don’t pull out the deposits. This bank is not back to where it was. They did a huge reverse split. He would suggest risk-adverse clients stay away from banks.

banks
COMMENT

This is a stock that just keeps going up. The dividend right now is $3.61. If you go back 10 years, the dividend was $1. 10 years prior to that, the dividend was $0.15. When you get a stock that keeps on increasing dividends like that, and you get a chart like the current one, that is what you want to have in your portfolio.

food services
PAST TOP PICK

(A Top Pick Aug 22/16. Up 72.36%.) A financial company, but unlike banks, it is not highly levered. It is basically in insurance business, more so they are in the business of providing financial advice for a fee.

food processing
PAST TOP PICK

(A Top Pick Aug 22/16. Up 54.49%.) A small-cap bank. If you are risk averse, he would advise you to get out of the stock. If not, the story is still good. Thinks there is still some upside, especially if interest rates go up.

banks
PAST TOP PICK

(A Top Pick Aug 22/16. Up 50.26%.) This is really 2 companies, insurance and a provider of 4O1K in pension plans, which is a great business. There was some concern about this company, because of new regulations from the Obama administration, which have been delayed for about 1.5 years. Has a terrific cash flow.

investment companies / funds
COMMENT

If you own healthcare providers, especially in the hospital supply area, they have been great stocks for a long time. We are all getting older and need more help. Prefers Medtronic (MDT-N) a little better. However, this is another dividend growth story, so you can’t go wrong here.

biotechnology / pharmaceutical
COMMENT

This has 3 things going for it. It is an international stock being Swedish, and European stocks have been stronger than US stocks for the 1st time in 10 years, and that should continue. Secondly, it is in healthcare which he likes. Thirdly, they’ve been doing a lot of research in immune boosting therapy, helping people fight cancer. This is going to be huge as we have so much further to go in fighting this scourge.

biotechnology / pharmaceutical
COMMENT

$1.8 billion a year is how much cash they are burning through. That is not good. Also, there are over 30 automobile manufacturers globally. He doesn’t like buying a company with that much competition. Even their competitors are bringing out electric cars. Lithium is very poisonous and the batteries are in the bottom of these cars, so what is going to happen to the batteries after they have finished with their useful life.

0
HOLD

Has a terrific free cash flow yield. It is a defence contractor. If you own, you’ve done really well. As long as international governments are not relying on the US to defend them, it seems there is going to be a lot of defence buying by countries such as Japan.

Defense
COMMENT

Sell?He doesn’t like the automobile manufacturing stocks, but does like the suppliers. Companies like this, once they become a supplier to a company for a certain part, tend to keep that business for a long time. This company has terrific numbers with high free cash flow yield, and you are going to get a boost in the short run, because there were a lot of cars destroyed because of the 2 hurricanes and the fires in California. These are all insured events, so for the next couple of quarters you are going to have some really good numbers. A well run company.

Automotive
COMMENT

This has some good numbers. The free cash flow yield is high. Pays a nice dividend. However, it is cyclical. You are going to lose a lot of money in the stock if there is a recession, so be careful. In the long run, if you can withstand the deep troughs and the recessions, then you are going to be okay.

Transportation
WATCH

It’s amazing how much good publicity Jeffrey Immelt got. The stock performance under his tenure was just terrible. He is gone now, and it looks like the new guy just wants to clean house. The debt was put on credit watch this past week, meaning that even the bonds are coming under pressure. It might be a little early to get into this. He would like to see something good come out of the company before he bought the stock.

electrical / electronic
COMMENT

One of the top 10 most widely held stocks in America. The average dividend is over 4%, and he would guess people like it because of its huge dividend. Over the last 10 years, the average annualized growth on the 10 most widely held stocks was 2.6%, not very good in a market which has done considerably better than that. Dividend growth is more important than the average dividend yield, so if a company hasn’t raised the dividend in 10 years, that is generally not a stock you want to buy.

telephone utilities
COMMENT

Kind of one of the anti-Amazon names. Despite the perception, the stock has lagged behind over the last 2-3 years, especially as compared to Amazon. They are growing their top line and are doing quite well in their battle with Amazon. They’ve shifted to an e-commerce platform, very successfully. Free cash flow yield on this is 10%.

department stores
COMMENT

Why is this down?60 Minutes did a story on the 3 large drug distributors, Mckesson, Cardinal Health (CAH-N) and Amerisourcebergen (ABC-N), that they are contributing to the opioid crisis. Or it could be that there hasn’t been much earnings growth over the past year because of pricing pressure, especially on generic drugs. He is bullish on drug distributors over the long run, and doesn’t think these stocks are going to turn around anytime soon.

wholesale distributors
DON'T BUY

A technology stock and there are very few that don’t have momentum, and very few that are cheap. This one is certainly not cheap but does have a lot of momentum. He would be a little cautious on this right now. (See Top Picks.)

computer software / processing
TOP PICK

A cheap technology stock. Cheap from the point of view of P/E ratio, cash flow, and is nowhere near its all-time high. They make networking systems equipment. Their customers are all the telephone companies of the world, mostly Europe and North America. The numbers have been terrific lately. They lost some business to competitors, but have some new products out. Dividend yield of 3.38%. (Analysts’ price target is $36.) All 3 of his picks are below their all-time highs.

electrical / electronic
TOP PICK

This makes equipment for furniture and carpet padding. Their 2 biggest customers are Ford (F-N) and Toyota (TM-N). They just announced earnings, and revenues were up 6%. Any time you get 6% top line growth, that is terrific. On top of that, they announced that they increased their dividend, which is the 47th year in a row they’ve increased the dividend. Dividend yield of 3.01%. (Analysts’ price target is $53.) All 3 of his picks are below their all-time highs.

INDUSTRIAL PRODUCTS
TOP PICK

(Used to be Rubbermaid.) They make Parker Pens, Waterman Pens, Sharpie Pens. They make a lot of different products that you can buy through a store or through e-commerce. Dividend yield of 2.28%. (Analysts’ price target is $56.) All 3 of his picks are below their all-time highs.

misc consumer products
N/A

Market. There has been a sleepy feeling in US equities, a lack of volatility. Volatility is at a low point, not seen since 1993. Stocks haven’t made a move since February. There are markets that are moving, but they are overseas, particularly in Europe, as well as in emerging markets where they’ve had gains year-to-date of 13% and 15% respectively. The US economy is doing fine and the rest of the world is struggling, but that is changing. The electoral mood in Europe is now focusing on the economy, and there are strong signs the economy is picking up. If you want to play in emerging markets, European companies have a larger exposure of sales to them, then US companies. European stocks have underperformed for 9 straight years, which leaves them undervalued.

Unknown
COMMENT

Thinks the market has soured on this company because of their exposure to Britain, which is in the middle of BREXIT. He likes this company. It’s a good story, because they have a very high free cash flow yield, which leads to dividend increases. Not a bad stock to look at.

specialty stores
COMMENT

A headline story, because they are being sued by their largest customer, Apple (AAPL-Q). They make chips which are mainly used in smart phones, but they also receive royalties for a patent they have, which basically divides and communicates the cell phone to a cell phone tower. Apple thinks they are paying too much. Looking at this on numbers, it is a great story and very inexpensive. High free cash flow yield and nice dividend. If they can settle things with Apple, the stock will do well.

Telecommunications
COMMENT

Over the long run, this has not been very good to investors. Highly indebted. It costs a lot to build cars, and it’s deeply cyclical. He doesn’t like deeply cyclical stocks.

Automotive
COMMENT

This concerns him, because the debt was just downgraded. They’ve had something like 17 quarters in a row where revenues have gone down. The dividend is not in jeopardy, but with revenues and earnings going down, you can imagine that someday it will be in jeopardy.

electrical / electronic
COMMENT

A safe pharmaceutical company? He has a philosophy that the analysts don’t really understand large pharmaceutical companies. They are typically very complex. He prefers looking at the cheaper names, and by just buying cheap, that will bail him out. Right now the cheaper names are in Europe. He is looking at things like Roche Pharmaceuticals or Norval Nordisk.

Unknown
COMMENT

This breached $800 billion in market cap making it the largest stock ever. He likes to think he can buy a stock that will double his money in 5 years, and he can’t imagine this one will double in size in the next 5 years. Has a hard time getting excited about this.

electrical / electronic
COMMENT

Prefers Manulife (MFC-T) which gives you better numbers. You get a better dividend and a better free cash flow yield.

insurance
HOLD

Just reported earnings which didn’t look too bad. The market didn’t like the earnings, the main concern being their cable business which has ESPN. He likes this franchise in the long run. They have been losing about 1% a year in revenues, but thinks they are going to find a way for that product to continue to make money for them.

entertainment services
PAST TOP PICK

(A Top Pick May 11/16. Up 39%.) This provides financial advice and also has a large insurance operation. Keep in mind that the entire insurance sector was really cheap last year, which was the primary reason he got interested. This is now a Hold.

food processing
PAST TOP PICK

(A Top Pick May 11/16. Down 17%.) Energy has been particularly tough since the beginning of the year. Also, their operational record has not been good. Their recently filed earnings report indicates their operating numbers are better, meaning costs are going down, and also are doing a little better with the drill bit. It has a nice dividend which doesn’t appear to be in jeopardy.

integrated oils
PAST TOP PICK

(A Top Pick May 11/16. Up 36%.) Possibly being acquired by AT&T. The takeover price is a little over $100 a share and the stock is $98-$99, so there is a little bit of upside. The stock was about $76 before the takeover rumours, which is a lot of downside if the takeover falls through. He doesn’t like that ratio. There is a chance the takeover will not go through, so he would suggest you sell your holdings.

Broadcasting
COMMENT

They are currently being sued by the government because of price collusion, working with the other meat suppliers to keep prices high. Also, the supply of meat in general is high. This has a very high free cash flow yield.

food processing
COMMENT

A company he has not recommended because it is very expensive with a very high beta, and his clients can’t stomach that kind of risk. Prefers cheaper names in this sector.

computer software / processing
COMMENT

Trading at an extremely high valuation. Many of the other auto companies are looking into building electric cars, so there is a lot of competition. The stock is very expensive. He doesn’t like this one.

0
COMMENT

This company has their fingers in a lot of different things. A very well-run company. One of the more interesting things they are involved in is being able to control everything in the home, and if they make it more user-friendly, it will catch on. You are probably on the right track with this.

INDUSTRIAL PRODUCTS
COMMENT

The only reason to buy this is because of its very high dividend. After 20 years, you are back where you started with this, but all along the way you have collected a good dividend. This company has some massive issues, because the costs for cell phone usage keeps coming down, and that is not a good model when your revenues keep coming down. Their debt was downgraded and is now rated as a BBB. The dividend is safe now, but someday you worry whether that will continue. He likes dividends, but he also likes dividend increases.

telephone utilities
COMMENT

They are currently trying to acquire another small equipment maker, but a higher bidder came out. (See Top Picks.)

Telecommunications
COMMENT

The company invented a drug that didn’t just help the patients, it cured the disease within 12 months. It would have been better business for them if they had invented a drug that merely made the disease better. A very profitable company, but he wouldn’t want to be an owner because revenues are going to be going down.

biotechnology / pharmaceutical
COMMENT

Banks are not as profitable now as they were prior to 2008, because they are less leveraged. This bank had to go for a bailout in 2008, and he doesn’t like companies where you can imagine them going out of business. Thinks there are better ideas out there.

banks
COMMENT

What you need to know when buying a stock in the retail sector is how they are going to be affected by Amazon (AMZN-Q). Amazon is changing the world as we know it. Costco is a company that can and does compete with Amazon on price. He likes this company, but there is another name he likes better. (See Top Picks.)

department stores
COMMENT

Recently hit a 10-year high. They did an acquisition of another bank recently that is going very well. He generally doesn’t like bank stocks, but if he is going to buy one, this is one he does like. This is not for the faint of heart, there is a lot of risk in stocks like this.

banks
COMMENT

This pays a nice dividend. They have a free cash flow yield that approaches 9%, so it is very profitable. Investors can expect to make the free cash flow yield plus any growth. A good start for investors to take a look at.

Transportation
COMMENT

Too risky for him. P/E ratio is too high, and it is going to be many, many years before they ever pay a dividend. They have very good management and a lot of creative people, and he thinks this is not going to be a fad, but that they are going to find a way to be around for a long time.

0
DON'T BUY

Competing with Facebook (FB-Q), which has much deeper pockets. Also, it is more expensive than Facebook.

0
TOP PICK

A consumer products and adhesive company. A few years ago, they acquired Dial soap. It is the 4th largest consumer products company globally. One of their customers is General Motors. Dividend yield of 1.4%.

Consumer Products
TOP PICK

You could buy Amazon (AMZN-Q) at 142X earnings, and a lot of risk goes with buying stocks with such a high P/E ratio. Walmart is trading at 17X earnings and gives a dividend of just under 3%. (Analysts’ price target is $74.)

department stores
TOP PICK

This makes Wi-Fi routers, which are in greater and greater demand. Their biggest customer is AT&T (T-N), but they also supply Amazon (AMZN-Q). (Analysts’ price target is $33.50.)

0
N/A

US Market. The market is at or near record highs. The Dow is breaking through 19,000 for the 1st time. Didn’t feel there was any substance or news in Donald Trump’s speech to Congress, so it was surprising to see the market up so much. He doesn’t think interest rates are going to go up a lot. Thinks the rally in banks has a little room to go, but you have to remember that the financials are the most leveraged sector of the economy. When you buy financials, you are getting a lot of risk for that leverage. He is looking at retail, but not the brick-and-mortar retailers, with the possible exception of Wal-Mart (WMT-N) and Home Depot (HD-N) which are expanding into the online ordering of things.

Unknown
DON'T BUY

This is a stock that made investors a ton of money in the 90s, but hasn’t made any money since. The problem is that they had to keep cutting prices, and that doesn’t seem to be getting any better. It looks like their revenue line keeps getting smaller. Dividend yield of 4.6%.

telephone utilities
COMMENT

A little too complicated a stock. It has a lot of moving parts. Also, any company that had to turn to the government for help in 2008, scares him. They let themselves get levered too high, so he doesn’t trust the risk controls. He would prefer something like Manulife (MFC-T) which has a better and steadier free cash flow yield and also pays a nice dividend.

banks
HOLD

This is a stock he likes a lot because management is so good. Every time there is trouble, this company finds a way to take market share away from their competitors. Keep in mind that this is about 75% agricultural, so they are going to rise and fall with the farmers of the world. Feels agriculture is a good place to invest in, because people are always going to have to eat.

machinery
BUY

A good defence stock? He would caution on rushing in to buy an industry just because a political party says they are going to increase defence spending. Generally speaking, it seems to be a disconnect between what they say and what they actually do. However, defence stocks are not terribly expensive if you look at the free cash flow yield. Lockheed Martin (LMT-N) is his favourite because it is the most profitable and diversified. He has looked at Boeing (BA-N) which is very profitable. Lockheed Martin would be his 1st choice, and Boeing would be 2nd.

Transportation
BUY

A good defence stock? He would caution on rushing in to buy an industry just because a political party says they are going to increase defence spending. Generally speaking, it seems to be a disconnect between what they say and what they actually do. However, defence stocks are not terribly expensive if you look at the free cash flow yield. Lockheed Martin (LMT-N) is his favourite because it is the most profitable and diversified. He has looked at Boeing (BA-N) which is very profitable. Lockheed Martin would be his 1st choice, and Boeing would be 2nd.

Transportation
COMMENT

A big fan. The healthcare sector is cheap. This one has a tremendous free cash flow yield. They pretty much have the market all to themselves, and he likes markets where there aren’t very many competitors. (See Top Picks.)

specialty stores
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