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Half of its business is a pharmacy benefits manager, managing not only the software programs but the distribution of pharmacy benefits in the US. The front end is a retail store, which always tends to struggle and pull down the overall business. They are doing a very good job on execution.
Has a very mixed opinion on this. Doesn’t like to sit on the fence because it is a really great company and really well run. The problem is, they are in an area of the market where there is low or limited demand for their products. Made an acquisition in Bucyrus a couple of years ago on which they overpaid. Wrote most of this down and will probably write the rest of it down. Globally we are seeing that commodities have rolled over and mining demand is lower.
This is his preferred name in the rail space. The best performing class 1 in the US, year to date. Good execution story and good management. Likes the leverage to all things that are recovering in the US. They transport everything from fertilizer to furniture to autos to chemicals, etc. Coal became a problem for them, but management made adjustments for that. He can see this going to the $29 level.
Apple (AAPL-Q) versus Google (GOOG-Q)? Thinks you can own both of these. Both are good companies. This one is a battleground stock. They are still the premier player in the space but margins are going to continue to go lower over time as they continue to introduce new products. There is probably a better entry point in the $350 range.
Apple (AAPL-Q) versus Google (GOOG-Q)? Thinks you can own both of these. Both are good companies. This one gives you good leverage to online advertising. There is the potential of them monetizing the Android system. They come out with innovative products. Big cash balance and there are opportunities for them to grow in the mobile space.
Asset manager. $800 billion in AUM. Wanted something that wasn’t a traditional bank but had leverage to rising rates as well as equity markets potentially getting better over time. Good valuation. Mispriced as there is a concept that as the Fed tapered there was going to be a great rotation out of bonds and into equities and that this was essentially a bond shop but 55% of their business is equities. Trading at about 14.5X earnings.
You are not paying an egregious valuation for this stock. An almost pure play on content. The catalyst that has popped up is that they are going to spin off Time Inc. because it is a lower margin business. Thinks they can monetize the HBO franchise, movies, etc. over multiple years and across multiple geographies. Handset makers and content people all want high quality content. Very low CapX the longer the product exists.
Recently announced some dividends and buy backs. What you need to understand about these companies is that they are not dividend payments but a significant portion of their capital that is classified as agency REITs. The Fed is really intervening in this market, because a portion of that is going into the MBS (Mortgage Backed Security) market. You have about a 17% yield at current levels. From a capital appreciation standpoint, the stock probably goes nowhere, but as long as you have that back stop of the Fed in there, you’ll probably earn that 17% for the next 6 to 8 months, but as soon as we start to see tapering, etc these stocks are going to trade off exactly like they did the last time.
Extremely big company. Thinks the prospects for organic growth are fairly low. Top line growth may be 2%-3% so it really is a cost cutting story. Making sure they have the right footprints and that they are in the right markets and have brand relevancy. Not his favourite name as he thinks it is fairly valued at current levels. Would prefer Target (TGT-N).