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Stock Opinions by Michael Hakes - CFA, MBA

COMMENT
Will the run-up in commodity prices continue this year? They've been weaker recently as the US Fed hints at raising interest rates to end of 2022/2023 and as China sells some strategic reserves. Oil prices are expected to stay high as world demand outpaces supply as we recover. In the U.S., inventories for products remain low, caused by supply chain bottlenecks and will continue this year. Inflation will be transitory, he feels. The pandemic has accelerated the digitization of the economy, which will keep wage inflation in check temporarily. Employers are competing with generous unemployment benefits in the U.S. Europe paid less, so people there want to get back to work. Also, the pandemic has encouraged people to work from home, which has enlarged the labour pool. Strong EPS revisions will continue for this (17% on S&P) and next year (14%) while the S&P is up only 6%. Markets will remain volatile for the next quarter or so as the supply chain sorts out. Consumer spending will be strong. Question about work is how much of a home/office mix it will be.
Unknown
DON'T BUY
A global leader in memory chips. Customers include data centres, PCs, graphics and autos. As we know, there's a supply shortage in semis especially for cars. Note: this is one of many cyclical swings in this industry over a 30-year period, so this shortage isn't a surprise. This sector demands flexibility and innovation to adjust to rapid changes in new products using semis with short life cycles. MU is guiding high-single-digit volumes for the next quarter. The stock peaked in April at $95 and is now at $77. It isn't on his radar now. It's not for the feint of heart, though the street really likes it.
computer software / processing
COMMENT
In May, they announced their target of a 20% reduction in emissions by 2030--a major announcement. But then the International Court in the Hague ordered a 45% reduction, which was a shock to RDS. So, they must speed up their plan, which is building a portfolio of low-carbon technologies, including renewables and bio-energy and hydrogen power. This is happening to all the oil majors, but have to compete with renewable companies as investors have bid up these stocks and assets. Short-term, this reallocation of capital has caused capex to collapse among all the oil majors. So, there's a squeeze in the oil market with demand spiking but with limited oil demand. There's no spare capacity. In the medium term we are awash in oil. That said, there could be a short-term opportunity.
integrated oils
COMMENT
Outlook on the U.S. banks The US banks are outperforming the S&P this year. For instance, BAC is up 36% YTD and Wells Fargo 51%. We're in the late innings for the US banks recovering. These banks will likely be able to buyback shares and raise dividends again. Also, interest rates are expected to rise sometime in the future and therefore benefit the banks. He feels inflation is temporary.
Unknown
COMMENT

The Amazon of China with hundreds of millions of uses and merchants. It's down 9% YTD as investors are concerned that management has underinvested in its businesses, spread too thinly over many initiatives. Will these initiatives accelerate the top line? This could be interesting, but he doesn't know BABA well.

0
DON'T BUY
A slow grower, 3-4% per year projected. Maybe their 5G investments will pay off, but it's risky. Trades at 11x earnings and pays a good 4.5% dividend, so those are pluses. VZ is not on his radar.
telephone utilities
DON'T BUY
The stock is languishing after losing its way in recent years. Their oil and aircraft businesses are uncertain, though they benefit as the economy recover. It's expensive on a PE basis. The dividend is very low. Not excited about this. He'd rather buy a pure play than own a conglomerate like this.
electrical / electronic
HOLD
Used to own it. Their devices, like the iPhone, are interwoven into our lives. They have growth for the very long term as they keep launching new products. Pays a low dividend. He foresees so-so returns in the future, but they are a fine company and are very well run. He has no problems with anyone owning this already.
electrical / electronic
STRONG BUY
He was concerned about Bezos going into space next month, but assumes they have taken deep precautions. Very bullish Amazon and it's a key holding. They're moving into value-added services, therefore good upside. Anti-trust concerns will overhang all the FAANGs. But it's tough to pick up a single share for a retail investor.
specialty stores
COMMENT

To play the used car market in the U.S. Has looked at Carvana, but doesn't know CarMax well. They have a digital online presence to attract customers, and they offer guarantees for their cars. They project high-single-digit growth, but the PE is not cheap. He's not totally against buying KMX, but slightly prefers Carvana.

Automotive
SELL ON STRENGTH

He bought it early last year, because they opened a new furnace in Hamilton. Fundamentally, they're basking in higher steel prices, but can they stay high? The new furnace expands their margins a lot. Sell at high-30s/low-40s, because this is a cyclical stock.

0
DON'T BUY
The A2 protein is easier for human digestion, says research, and is unique to their milk. The stock has had a wild ride from $2-22 in the past four years. Last August, problems began when they tried to buy out a New Zealand dairy that operated partially out of China; A2 wanted to produce infant milk in China. Then, Covid hit, so they guided down as their re-seller channel in China shut down. Be very cautious buying this, because it's a one-product company that's unproven.
agriculture
TOP PICK

Has 15,000 stores in two brands. New managers will remodel stores, introduce multiple price points and new combo stores. This strategy under a new CEO will raise same-store sales growth, benefit EPS and improve margins over 3-5 years. DOL's multi-price strategy worked, so it should work for DLTR. He sees 30% upside. (Analysts’ price target is $118.48)

merchandising / lodging
TOP PICK
An old-school huge media behemoth with assets in cable, SkyTV and NBC Universal. {technical problems, so no more comments} (Analysts’ price target is $63.78)
Cable
TOP PICK

Will benefit from cross-border travel, and B2B penetration with value-added services they're layering on. Travel will add 6-7% EPS growth and new initiatives in C2B will add 11% volume growth through 2024. Value-added services include fraud authentication and analytics. He prefers this to Visa because of better exposure to developing markets and higher growth. MA will be 15% higher in 12-18 months. (Analysts’ price target is $429.84)

other services
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