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Markets. We are on a teeter-totter in the sense that stocks are not cheap, but earnings are not that good either. We have seen earnings fail to outperform the previous year, 4 quarters in a row, and the next quarter is predicted to be another of those. We are in an earnings recession and are not seeing great earnings. The market has moved up modestly and is pretty much sideways, which is the way it should be. You want to reward good earnings. The correlation between earnings and stock price is the greatest predictor of where things are going. He is comfortable in a seesaw type of market, where good stock picking is rewarded. We are not totally rolling over as an economy. The economy is slow growth, but progressing. What really affects earnings are energy prices and foreign exchange, which tend to be transitory, not permanent. When that starts to turn around we’ll start to see a positive progression of corporate earnings. (You can look at a blog on his website at www.goodreid.com, where he discusses investing for the long-term.)

COMMENT

Just reported and had quite good earnings. They are reeling, of course, from the government decision to not allow the Allergan deal to go through. There is a lot of debate because the 2 companies were within the law, but the tax inversion issue is a big one, and the way it was done is leaving a bad taste in people’s mouths. Pfizer is just starting to move out of the issue of Lipitor coming off patent. It was a blockbuster drug before, but when it goes generic you see sales drop dramatically. Their pipeline has been building. This company has had basically flat revenues and earnings for 4 or 5 years, and is trading at about 20X earnings. A bit of a “show me” stock, and that goes for most pharmaceuticals. You are better off going into biotechs. Prices have come down quite dramatically, and are trading at cheaper multiples than Pharma drug companies. Have a look at Biogen (BIIB-Q) or Celgene (CELG-Q).

BUY

A large money centred bank, and a little more mature and stable than a Citigroup (C-N) or Bank of America (BAC-N) coming off the ‘08 experience. Not as inexpensive as the others, but more stable. He likes this bank. Citi is trading well below its tangible BV.

COMMENT

This has been a great stock and has done very well over the years. They are buying Visa Europe, which is a terrific purchase for them. They do more business than MasterCard, American Express and Discovery combined.

COMMENT

The future is very, very bright. You are paying up on the expectation of future growth. Their numbers are astounding. They have 1.65 billion monthly users and well over 1 billion of active daily users.

HOLD

People either love it or really dislike it. He continues to like it. In the last 15 years, this stock has been halved 3 times. It’s not like it is different this time, but you always have to look into the future. This company, over time, is growing well. The latest quarter, which was an off cycle quarter, didn’t grow so well. While everybody wants to fit the equation of quarter to quarter, the product cycle of this company doesn’t work quarter to quarter. Had a fantastic introduction of the S model iPhone, where units grew 40%-45%, followed by the off cycle. Putting the 2 together you had a pretty good progression.

PAST TOP PICK

(A Top Pick May 5/15. Down 18.53%.) In the air ambulance business. They have 2 areas of operation, contracting with people that need an air ambulance, and the community side where they work for hospitals transporting patients. Things tend to be fairly lumpy, but looking at a long-term progression it is a really good story. Not expensive.

PAST TOP PICK

(A Top Pick May 5/15. Up 26.91%.), Have doubled their net profit margin over the last 7 years. Same-store sales are at around 7%, and total sales at around 10%. With low interest rates, people are forming homes at a faster rate. The company is in new homes as well as renovations and repairs.

PAST TOP PICK

(A Top Pick May 5/15. Down 10.27%.) Really likes this company. They tripped up by projecting earnings through 2018 of $8, and are just not going to get there, so the market has punished them a little. This media company is really monetizing their content very well through HBO, the over-the-top streaming model. Will probably earn around $6 next year, so it is not expensive. They are not as affected by cord cutting as other media companies. Still a Buy.

COMMENT

The best comparable to this would be Citigroup (C-N), which he owns. The whole banking sector is really going to move in tandem on a catalyst, which would be interest rates. Very cheap from a valuation standpoint. These will do well over time, but you have to be patient with them.

COMMENT

Quite expensive, trading in the high 20s on a P/E valuation. Have done a fabulous job. Feels the real catalyst is China. They are moving around the world opening up businesses that are very effective. With online shopping, mall traffic is starting to drop which worries him a little. However, same-store sales have been robust. He doesn’t want to pay up for future growth which is already built-in and is less than guaranteed.

COMMENT

Difficult company to understand, because they tend not to be traditional. They don’t try to satisfy the street by returning capital to shareholders through dividends or buybacks. They don’t try to satisfy the street by having a progression of earnings over time.

DON'T BUY

This makes him uncomfortable. He doesn’t like the concentration. They derive over 60% from their hepatitis C drugs, which have been very successful. There are a few issues. Very high cost at about $90,000 for a cure which is a 90-day script. A lot of people are after them to get the price down. There is also competition from other drugs. It is a cure, which is great from a social standpoint, but from a business standpoint do you want to invest in a company where the drug will no longer be needed.

DON'T BUY

This is a materials company, mostly in copper and some in gold. The issue he has is its debt, and how much of an issue that puts them in if we start to see some failure on the commodity side.

COMMENT

A fabulous company. Have had their hiccups over the years. They are in 3 major areas including consumers, devices and pharmaceutical. The pharmaceutical area has done the best, and is now pushing 45% of their business. Well-managed and a great balance sheet. Valuation is somewhat high at about 20X earnings.