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Stock Opinions by Brian Madden

COMMENT
Pace of price increases uncomfortably high for a while? Yes, but he's also in the camp that thinks inflation will be transitory, as in "non permanent". Inflation will be meaningfully above-target until the back half of this year. See his firm's article "Death, taxes, and inflation". At the end of the day, Fed will fulfill its mandate. He's positioning for some interest rate increases this year, though not enough to take us to a restrictive stance on monetary policy.
Unknown
COMMENT
Promising sectors. Cyclicals poised to continue to perform well, and that means banks, insurance, energy, basic materials, but not to the exclusion of the secular growth areas like his core holdings in technology and emerging growth. Energy and financials should continue to show leadership in the market and above-trend growth in earnings. Starting to see emergence of value over growth, but not enough yet to put an all-in bet on one or the other. His strategy is to own the best in each category of growth and value.
Unknown
BUY
TD vs. NA He prefers TD over NA and advocates taking profits if a position has become overweight. Opportunity in TD looks better for 2022. TD is over-capitalized the most. Its US-centric footprint is more net-margin sensitive than Canadian banks. With interest rates poised to rise, this should advantage TD. Its capital markets business (with lots of operating leverage) is less important to its earnings than NA, and this will weigh on NA. NA's CEO is new, whereas TD's is seasoned.
banks
DON'T BUY
NA vs. TD He prefers TD over NA and advocates taking profits if a position has become overweight. Opportunity in TD looks better for 2022. TD is over-capitalized the most. TD's US-centric footprint is more net-margin sensitive than Canadian banks. With interest rates poised to rise, this should advantage TD. TD's capital markets business (with lots of operating leverage) is less important to its earnings than NA, and this will weigh on NA. NA's CEO is new, whereas TD's is seasoned.
banks
DON'T BUY
He likes 3 others better than BMO. It's done really well, making bold changes. Recently bid for a large US regional bank, strategically sound but pricey. The other banks don't have that risk.
banks
COMMENT
Add a 4th Canadian bank? If you have 3 banks already, you probably have enough exposure to the sector, depending what the weights are. In some industries, the idiosyncratic differences between companies is dominant. In others, the broad macro story drives the returns through the whole sector, and this applies to banking. The core weighting will drive your results more than which one you pick. Which isn't to say that you shouldn't pick the best.
Unknown
COMMENT
The world of M&A is murky. A lot can happen. He can't say whether a higher bid will come along.
Mining
DON'T BUY
He prefers the royalty companies, as you divorce yourself from the risk of cost overruns, strikes, rockslides, etc. Particularly troublesome asset in Mauratania, due to government intervention.
precious metals
DON'T BUY
Used to be a market darling. Suffering from structurally declining profitability since 2012. ROE has gone from 21-22% to 8-9%. Valuation has been dragged down. Core problem is cheese, with slow organic growth. Making acquisitions has diluted the quality of the core legacy business. Drastically underperformed the TSX for a decade, as well as consumer staples. Not in distress, but not a compelling total return.
food processing
BUY
Owns it in an income-seeking mandate he manages. Office portfolio spun off into PMZ.UN, which makes sense. Total return and income prospects are sustainable and compelling. Comfortable buying at these levels.
property mngmnt / investment
BUY
Owns it in an income-seeking mandate he manages. Office portfolio spun off from HR.UN, which makes sense. Total return and income prospects are sustainable and compelling. Comfortable buying at these levels.
property mngmnt / investment
BUY
Sensational performer in 2020, as was the entire renewable sector. Hit by winter storms in Texas last year. Back seat to more traditional energy names. For the next decade, you have to have a core position in some of the renewable energy names. A leader in the space. Pullback is buyable.
Utilities
PAST TOP PICK
(A Top Pick Jan 07/21, Down 40%) Still has confidence in the name. An emerging growth sector with ups and downs. Company strategy plus industry dynamics will make it a long-term winner. Victim of sentiment and legislative delays. Heightened competition. Still buying.
agriculture
PAST TOP PICK
(A Top Pick Jan 07/21, Up 12%) Volatile. Attracts a lot of skepticism, especially in the US, but keeps beating on sales and earnings. Sensational brand, very little substitute for the products. Under-penetrated outside our cold northern climes. Consensus growth is sales 25%, earnings 48%. Pullback is buyable. Look at historical post-earnings reactions; the stock can pop.
clothing
PAST TOP PICK
(A Top Pick Jan 07/21, Up 22%) More in the tank. Distinct because all assets are in Colombia. Production has grown considerably. Cashflow has grown more than production. Hyper-focused on profitability. Debt free. 100's of million of cash on the balance sheet. Buys back shares. Enacted a dividend. Great management, valuation, and entry point.
oil / gas
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