Today, Larry Berman CFA, CMT, CTA and David Baskin commented about whether TRP-T, BNS-T, MG-T, CCO-T, TA-T, XOM-N, BAC-N, BAM.A-T, IPL-T, ARX-T, VZ-N, POW-T, BB-T, CU-T, GS-N, EMP.A-T, AGU-T, GOOG-Q, CPG-T, RIG-N, CCO-T, CPG-T are stocks to buy or sell.
From a 3-5 year perspective he likes oil and gas. He was looking for pullback and we got it. Looking out at the dividends from the energy sector, relative to where the banks are, he likes the dividend in the energy sector much better than the banks for the next 3-5 years. There is talk, though, in the market where Saudi Arabia are going to be complacent in the energy price and this will punish Russia. The spike below $80 in oil is probably the bottom and certainly in the low end of the range. Below $75 makes no sense because of cost of production.
Gold. A number of months ago he identified a double bottom. We tested those. But every rally has gone to lower highs. The now triple bottom is still vulnerable. Gold is not responding to recent S&P lows the way it should. Wait for panic selling and then buy in for the next decade. The lows of last year have to be taken out and then there has to be panic selling.
Educational Segment. Volatility and the Bond Market. In his sleep at night portfolio he looked for this correction. Bond markets have done very well. With 3 ETFs you can buy the entire world of fixed income. He saw a 10 point spike in their charts. Hedged fund portfolios are forced to come and buy fixed income securities. He looked at the spread between VIX futures. Wednesday of last week we saw the spike in the VIX spot and the bottoming of the S&P. What he did was to get out of a lot of fixed income and rolled it into equities while they were so low and bonds were so high.
Markets. He is starting to pick at some stuff. He gets the sense that the worse is over for the correction. Same for the stories that had people nervous have started to abate. We were three years without a pullback. He never sells into those things. November and December are pretty good months usually. If you held good solid companies you only got knocked back a few percent.
Cash flow per share is the more important metric. Don’t get fussed about the high PE ratio. The cash flow has to pay the big dividend and replace assets as they deplete. He has never been bullish on CPG-T because their payout seems overly optimistic. The payout ratio is unsustainable if oil prices stay low for any period of time. If they cut the dividend then the stock will fall like a rock. He only has SU-T and CNQ-T.
Life Companies. They make more money when bond yields are higher. Right now bonds are so unrewarding. If you are SLF-T or one of the others, then what you get on your bonds is so much less than before the financial crisis. The question is how they can invest unearned premiums. He thinks it is premature to buy the pure life insurance companies at this time.
Markets. Every time there is a Monday holiday we seem to get some market volatility. S&P got down 9.4% and he was looking for 10, so we saw that. 16-17% of the S&P has reported already and he gives it a B+ rating. IBM missed big, but when looking at various sectors, the change in earnings have been actually pretty good and in fact a bit better than expected by about 2-3% going into the quarter. Revenue has been better than expected except for IBM and they are pointing to currency problems. IBM may be a specific story. We’ve seen some pretty good moves in financial stocks in the US after earnings reports. He thinks it is a 70% chance it is a market bottom for now. It may be a challenge in 2015 as the FED tries to ‘remove accommodation’.