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A great company. Had a terrific run over the last couple of years. Not only has there been a real global story to auto sales in places like China, but the NA recovery has been a terrific story too. The only caution is that the company has gone through a re-lift of its multiple. It used to trade in a 7 or 8 times earnings, but is now trading at around 12.5 times. North American auto sales numbers are already high, so he doesn’t know if you are going to see huge growth going forward. For a cyclical recovery story, he would prefer US housing over the auto sector.
Really likes the story. Very well-run. Last year it got to a very high valuation level. Ran into some trouble in the 2nd half of 2014, when Alberta had its energy problems. It got down to the low $30s and he started accumulating at that time. The outlook is fairly flat for earnings growth this year, but over the next 2 or 3 years he thinks it will have very strong earnings growth. Have a lot of opportunity to make more acquisitions given some of the weakness in Western Canada.
A security monitoring company that is cutting edge, moving the security video world from analog base to an IP based solution, at a very high level and a very high resolution. It has a massive addressable market that it can play into, because the entire world is using analog cameras that are not very good. Growing at 30%-35% a year. Not cheap, trading in the low 20 multiples, but he really likes the story. This is a premium grower.
This is the only bank that he buys, because a lot of the Canadian banks have being constrained. Canadian banks are fantastic franchises and are dominate in many of the financial services. What is unique about TD is that they more branches in the US than they do in Canada. His personal preference would be a US pure play such as Bank of America (BAC-N) or Citigroup (C-N). (See Top Picks.)
Energy stocks have had a terrific run recently, and we are at the point where a lot of them are anticipating higher energy prices. He is not sure energy prices will move a lot higher from where they are. Would prefer some of the alternative plays that are still at their bottoms such as service plays or sand producers which are still at their lows.
(A Top Pick Oct 14/14. Up 32.6%.) This company is always going to go from a position that it is such a big company, people won’t believe it is going to grow any more. The iPhone 6 is a very specialized iPhone and is taking market share from other vendors. Dividend yield of 1.61%.
(A Top Pick Oct 14/14. Down 22.35%.) This makes a motion sensor access chip, cutting-edge technology, for all smart phone devices and those that are going to be in most of the wearable devices. A small market right now and is in its infancy. Had some problems in the fall because some of their very big vendors compressed their margins. He still likes this a lot.
Has been a great story. Their story is to do acquisitions to find drugs and products that mesh with what they already have. Valuation has crept up and is almost 20X earnings now. He has reduced his position, and one of his bigger names now is Actavis (ACT-N) which is trading at only 16X earnings, and is growing faster.
All the North American rail companies have struggled in the last 3-4 months. They all have different levels of intermodal and commodity businesses, but by and large it has been a weakening economic activity in the US. Thinks GDP growth is going to come back later in the year for both the US and Canada. Look for a really good entry point later this year on all of the rails.
Currencies. From late last year into about the middle of the 1st quarter this year, the big trade was a really, really strong US$. With the quantitative easing impact in Europe pushing down currencies along with the commodities collapse, it was very much a one-way trade. He had anticipated the impact of the QE and lower commodity prices on the globe. This had been terrific for a lot of importing countries such as India, Japan and China. Europe had the double whammy of QE, of weaker currency and weaker commodity prices, which double stimulated their markets. Economies globally are going to start responding in the 2nd half of this year. We are starting to see the results of this with the European and Asian markets being the strongest markets. Expects there will be volatility in the US$, but it hit its peak in the last couple of weeks. Financials, particularly in the US, have been struggling year to date because yield curves have been close to zero. Because of this we are starting to see European yields come off the zero mark. As those lift, we are starting to see North American rates lift as well. This will be fantastic for financial stocks. Expects there will be a recovery in commodity prices in late 2015 and into 2016.