N/A

US Stocks. Fairly valued. If you take $110 in earnings and put a 15 or 16 times multiple on it, that is kind of where we are. As an equity investor he is trying to figure out not how we got here, but where we are going forward in 6, 12 and beyond months. With the weak economic backdrop, how are equity investors going to gain going forward. That is a tricky question. He has a Neutral trading bias. Trimming names where they need caution. Finding opportunities is extremely difficult. Still thinks the US is the best place to be for equities.

DON'T BUY

This business is definitely under pressure. Like a lot of the big box format stores, they expanded and expanded and got into different areas of the market and became over saturated. The former chairman of the board is now back and things have improved. However, at the end of the day, the longer-term thesis is that the store format is to get much, much smaller and it has to address how the online retail businesses are essentially stealing their business. Thinks earnings power is lower over the medium term.

BUY

Likes fundamentally but likes a lower entry point. He has had success in the past by getting in at around $30 and selling it at around $40. Well-run company. Verizon (VZ-N) has just agreed to buy back their wireless business from Vodafone (VOD-Q), so this has them tied up and they have to spin off some assets. Thinks they overpaid. In this environment, AT&T makes sense because they are trying to expand. Have already put $6-$7 billion to work this year. Generates a significant amount of cash flow. From a dividend/income type company perspective, he likes it at this time.

DON'T BUY

With this you have to have a call on copper prices. Over the next year he thinks copper prices will essentially stay where they are. Previously this was a pure play copper company. Spun off some assets in the energy patch, but eventually bought back. He questions the way they went about buying and the capital they used and was it necessarily in the best interest of the shareholders. Also, this distracted them from their core business. Assets are okay. Stock is going to be a play on what is happening with the underlying commodity and he thinks copper doesn’t do any more than $4 a pound over the next year. Probably fine for a longer-term holder.

DON'T BUY

This has been a complete turnaround story. Trading at 6X forward earnings. They really need to show execution. There is limited revenue growth, limited sales growth and they are trying to chop expenses of the bottom line. He questions if they really change themselves from a traditional hardware business, which is under a lot of pressure, to something that looks more like a software business. Software is only about 5% of revenue and it is going to be very difficult for them to turn this ship around.

BUY

Interesting company and he has a positive bias on them. He legitimately thinks they can turn their business around from the traditional copier type of PC/hardware business to something that looks more like a services business. Around $10 is a fair entry point for the stock. Your upside over 12-18 months is probably $14-$15.

BUY ON WEAKNESS

Had a tremendous run up, 25%+ year to date. Likes that they are giving money back to shareholders in the form of dividends. Put the dividend up 22% and are buying back stock which he thinks they should be doing. Looking out over several years, they generate a significant amount of cash flow, which can be reinvested into things like Xbox, servers and tools, online gaming franchise and they can broaden out their offering. If it got back down to the $30 range, he would be interested in it.

COMMENT

Street was negative on this because they largely don’t have leverage to the mobile market. They missed this completely. Hands-down they are the best chip maker out there. Lost direction when they missed the mobile market. Thinks the stock will continue to work because they will gain market share over time. If they can take 1% of market share per year over the next several years, it is a positive trajectory for them. It is now starting to gain leverage to the mobile market and he likes that the chips are the best chips available. His bias is positive on the stock.

PAST TOP PICK

(A Top Pick June 3/13. Up 9.53%.) Still likes. High-quality company. Own 86% of VMware which does virtualization software and infrastructure. At some point, he believes they will buy this company. Have been increasing their dividend and buying back shares. Well managed.

PAST TOP PICK

(A Top Pick June 3/13. Down 7.46%.) Having more trouble in Canada than expected. There had been a significant run on the stock, which he had caught. Well-run business but they reported weaker than expected same-store sales. There is probably a better entry point.

SELL

Executed very well in terms of spinning off businesses and retooling a lot of the stores. They are not necessarily leveraged to new home sales but more to existing home sales as people redecorate, etc. At this level he doesn’t think valuation multiples are going much higher from here. If they report a quarter or same-store sales and stumble, this stock is going to get hammered.

BUY ON WEAKNESS

Recently sold his holdings because he had had a tremendous return. Tobacco stocks are very defensive and he didn’t want to be that defensive. As interest rates creep higher, the stock essentially rolls over. A better entry point would be around $80.

BUY

Thinks this one is worth $34-$35 over the longer-term. Healthcare legislation in the US doesn’t actually affect this company. About 60% of its revenues are derived from overseas. Healthcare legislation will basically add plans for them. Distribution of drugs domestically and overseas continues to grow for them. Very solid balance sheet and relatively low payout ratios. Good dividend support.

HOLD

Utility stocks have basically sold off as interest rates have moved higher. Would continue to hold this as the FOMC have indicated that they want to try to keep interest rates down. This has given a bit of a lift to utilities. Wouldn’t be overweight on this sector.

HOLD

Great company. Extremely high barriers to entry and it’s only real competition is MasterCard (MC-N). There are no default, interest-rate or credit risks. They are in technology not financials. Continues to drive very, very solid earnings. There are regulatory risks. Thinks this business will continue to grow over time. Very solid franchise. Trades at a fairly lofty valuation.