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Stock Opinions by Christopher Blumas

COMMENT
2019 has been a pretty good year for North American stocks, though there's no shortage of things that have scared people. Investors are bidding up companies that can grow. Watch for market pullbacks, since it's getting harder to find things to buy. Low bond yields are pushing people into buying stocks. Meanwhile, volatility has gone up. Pick your stocks, set a price and jump on them when the pullbacks happen.
Unknown
COMMENT
They converted from an LP to a corporation which attracted a different shareholder base (index funds). This shift spiked their valuation. He owns BAM instead, which shares the same drivers as BX: low yields, pension plans and institutional investors. These stocks are essentially synthetic bonds with assets. Trades at 15x forward distributed earnings. BX is a well-run company in a shareholder-friendly space.
investment companies / funds
DON'T BUY
A strong performer over the long term, but he's wary of it now. We're starting to see softness in the end markets; TFII is very economically sensitive and economic growth is slowing. Better to buy this when the economy is rebounding. As logistics grow more sophisticated, they have to invest more, and the bigger companies are better suited (can afford) for that investment.
Transportation
BUY on WEAKNESS
Very well-run with a great balance sheet. All three operating segments are showing strong growth, starting with the cloud. It trades at 25x earnings ex-cash, which is rich. So, wait for a pullback at 22x earnings. They return a lot of capital to shareholders.
computer software / processing
DON'T BUY

Red flags: they're shifting away from coal energy--and this will take time--and their dependence on Alberta energy. Instead, buy AQN, which pays a regulated return, though buy on a pullback, and it's done a great job growing. AQN is his favourite in this space.

electrical utilities
WEAK BUY
One of the few gold companies to consider, to create value. Others have destroyed shareholder value. FNV is based on a royalty structure and has done well over time. Problem is the current valuation is now high. (He owns no gold now.) In gold, look at the streamers or hard gold itself.
precious metals
WATCH

A lot of negativity around Amazon isn't specific to Amazon. Rather, the tech companies are coming under scrutiny for anti-trust. He doesn't know how this will play out. He owns Google and MSFT instead, but keep your eye on Amazon, which are so disrupted. Also, their fundamentals keep improving, reinvesting constantly to be disruptive.

specialty stores
COMMENT

He likes the US banks and prefers JPM, but they're all hamstrung in what they can do and acquire. They will increase dividends and buyback shares. Earnings growth will come from committing their profits to share buybacks. BAC enjoys quality earnings. Debt is fine. Sinking interest rates will squeeze their margins, but they have other businesses outside lending to offset that.

banks
DON'T BUY

Wait. Don't go near this now. Sure, they enjoyed a huge pop after their Amazon deal. CJT has a near monopoly on overnight air freight in Canada. Their CEO took some money off the table. It's slightly cyclical and risks more competition in the future.

Transportation & Environmental Services
BUY on WEAKNESS
Pays a regulated return, though buy on a pullback, and it's done a great job growing. AQN is his favourite in this space.
electrical utilities
PAST TOP PICK
(A Top Pick Jul 25/19, Up 7%) He still likes it. Great for income and would buy it today. The only issue is the lack of pipelines in Canada, but in the end there's a fundamental need to move oil across the country.
oil / gas pipelines
PAST TOP PICK
(A Top Pick Jul 25/19, Up 6%) Good for income investors. Though weaker than its peers, BNS at 10x earnings is still a good stock worth buying.
banks
PAST TOP PICK
(A Top Pick Jul 25/19, Up 1%) UTX will merge with Raytheon then spin off its HVAC and elevator businesses. They will create value with that merger, which will unlock value of 30-40% over the next two years.
mngmnt / diversified
COMMENT

A very defensive space, telcos. Not a growth stock, but pays income. He prefers BCE, because it just finished a big capex cycle and pays a higher dividend. Also, wireless penetration in Canada is limited, which in turn limits growth. That said, all the Canadian telcos are good for the long-term. Buy for the dividend, not growth.

Cable
COMMENT

This has only so far to run. Their merger will cap the share price. It will trade in a narrow band. The merger will likely go through and make it very competitive long term. He likes this and UTX (the merger company), but he sees more value in UTX after the merger.

Defense
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