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Stock Opinions by Brian Madden

COMMENT
Recession shopping list. Time to prepare for a recession is not when one is in full swing. Just like the time to buy insurance is not when your house is already on fire. He set plans in motion earlier this year in anticipation of a slowdown in the economy. It's looking increasingly likely a recession is in the making, and you want to be positioned for the environment 12 months from now. Your portfolio should be more defensive, have more cash, more gold and utilities and staples, light on high beta and financials and industrials and some cyclicals. Do your research on things you want to own for the next up cycle. Bull markets follow bears, as surely as night follows day.
Unknown
COMMENT
What if you haven't raised cash by now? Sell now, or ride it out? A recessionary bear market lasts, on average, 16 months. S&P 500 is down 1/3 off prior highs. Shortest recessionary bear market was 2 years ago, which started in February and ended in March. You don't want to be making binary decisions of all in or all out. Look at your portfolio, stock by stock, and sector by sector. How resilient is it? Strong balance sheet? A need or a want? This one will be driven by consumers tightening their belts. Groceries, gas are needs. $6 foamy latte could become more of a want when things get a bit darker.
Unknown
DON'T BUY
Needs vs. wants. Tim's is the vulnerability at 40% of the operating profit, and 25% below pre-Covid. Many people are not back in the office. Popeye's has plateaued. Challenging macro backdrop.
food services
DON'T BUY
Quick service food industry. Not timely. Brands like WEN, YUM, MCD, and QSR. Shares are all down 20-25% YTD. Avoid.
Unknown
BUY
Very timely. Unique is all production is in Colombia. Growth story, free cashflow machine. New leadership. Buying back shares, production growth of 17%. No debt, 4x earnings. Best in class. Yield around 4%.
oil / gas
COMMENT
Impact of recession on oil demand, its price, and related stocks? The elephant in the room with any commodity. If you knew what the price was going to be, you'd know how to play the sector. Recession will throttle back demand. Wild card is what will happen with supply. A lot of supply is not getting online because of the Russia-Ukraine conflict.
Unknown
DON'T BUY
CWB vs. LB He'd buy neither right now. Financials are not necessarily what you want going into a recession. Credit losses can sting. Regional banks are not as well diversified as the bigger banks. No wealth management. CWB is more exposed to commercial and industrial loans, so losses can be greater. CWB edges out LB by a hair.
banks
DON'T BUY
LB vs. CWB He'd buy neither right now. Financials are not necessarily what you want going into a recession. Credit losses can sting. Regional banks are not as well diversified as the bigger banks. No wealth management. CWB is more exposed to commercial and industrial loans, so losses can be greater. CWB edges out LB by a hair.
banks
HOLD
Higher beta. More sensitive to the market than H, FTS, or one of the banks. On big down days, the spicy stocks suffer. One of the better quality nat gas producers. If bullish on nat gas, and he is, you can comfortably own it.
oil / gas
HOLD
Go-to name when global investors want more exposure to oil. Strong balance sheet. High quality. 6x earnings, huge cashflow this year. Could correct back to mid-low $60s, a good entry point. Yield is 4%.
oil / gas
PAST TOP PICK
(A Top Pick Jun 03/21, Down 9%) Asia is promising. Sluggish GDP in Canada is holding it back, as well as prior management decisions. Looks perennially cheap, but the stock can't seem to get out of its own way.
insurance
PAST TOP PICK
(A Top Pick Jun 03/21, Up 18%) Fits well with needs vs. wants in this environment. The CEO says they "sell people time". Procurement clout lets them price competitively on fuel, which is so important now. Same store sales on merchandise may check back. Modest organic growth bolstered by great acquisition capabilities.
food stores
PAST TOP PICK
(A Top Pick Jun 03/21, Up 52%) Russian invasion, tragically, has driven the price. High agriculture prices result in farmers planting more acreage, which creates high fertilizer prices. Once-in-a-decade bonanza of cashflow. Will make fresh highs before it's done.
agriculture
COMMENT
Canadian financials. Great businesses, especially the banks. Core holdings, though sometimes you want more or less exposure. In an economic slowdown, as he expects this year, you want to pare back. Weed out the names in your portfolio that aren't resilient through the cycle. He owns RY, TD, BMO, and BAM.A. Each has unique aspects that make for good diversification within the sector. BAM.A is the best in class alternative assets manager in the country. Pullbacks provide an opportune chance to buy, put them away, and collect some income. Strong, sustainable, competitive advantages. Strong compounders over time.
Unknown
BUY on WEAKNESS
Core holding, though sometimes you want more or less exposure. In an economic slowdown, as he expects this year, you want to pare back. He owns RY, TD, BMO, and BAM.A. Each has unique aspects that make for good diversification within the sector. Pullbacks provide an opportune chance to buy, put them away, and collect some income. Strong, sustainable, competitive advantages. Strong compounders over time.
banks
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