Latest Stock Buy or Sell? Make More Informed Decisions!

Market. Sometimes you have to listen to what the market is trying to tell you. Since early February, the US market has been moving up, despite 1^st quarter earnings of about -6%, and the 1^st quarter GDP also being pretty lousy. Thinks the market is looking forward to some earnings advance. We need earnings to grow in order for stocks to grow. For earnings to grow we need the economy to move forward. Consumers are in pretty good shape. They don’t have too much debt. Also, feels the US$ is going to go down which will help consumers outside of the US. Also, many emerging markets finance their dollar denominated debt, so when the dollar goes up, they have higher payments to make which is tough for emerging-market governments. Also, many commodities such as oil and natural gas are priced in US$s, and when the dollar goes up it makes those commodities more expensive than what they are in the US.

This has been a well-managed company for some time. What you are buying into is a very high beta of 1.45, meaning it is 45% riskier than the market. He would avoid the stock because there is too much volatility. Also, one of their major inputs is fuel, and feels the price of oil is not done going up. There will be a better chance to get this in the near future.

There are 2 cautionary notes on this. 1.) They have offered a partnership. Canadian investors who buy US partnerships are subject to a 35% tax on the dividend. However, they now offer a share class that is not a partnership. 2.) Richard Kinder is the CEO. He was the president of Enron. Has grand ambitions, and is more interested in making the company big rather than making shareholders rich.

Pipelines. These are going down because of the fear that their customers are going to go bankrupt, and some of them are. If they go bankrupt, the contracts are potentially not going to be valid. Even if they have fixed-price contracts, they won’t be any good if the customer is bankrupt.

He would rather own advertising companies in the consumer discretionary sector. You get a better dividend and a smoother ride.

Wouldn’t own this stock. He has clients that own it, and they are going to start selling it. The signs are in that the company has finally hit the end of the road. Their problem is that their products are very expensive relative to their competitors, so profit margins are very high. The P/E ratio is not very high. The only way the stock is going to continue to go up is 1) to convince you to buy a new iPhone every 2 years or 2) invent a new device. Early signs are that the Apple watch is not moving the needle.

Healthcare is a great sector, but the worst performing one year-to-date. Politicians are talking about capping prices for healthcare manufacturers, which doesn’t help. More importantly, Medicare and Medicaid US administrations are trying to cap prices and this one is being hit particularly hard. There are better names in this space.

This is getting very interesting. The company has been painted with the story that it is a failed company and nobody is buying Xerox machines anymore. They peaked in 2000 and has been straight down and flat lined since then. It looks like they have gotten to the point where revenues have finally stopped going down. Have around $17-$18 billions of revenues. They are in 2 divisions. Documentation of outsourcing and IT consulting. Hasn’t bought the stock yet, because he doesn’t entirely understand what they do.

A very difficult stock to get your hands around, because like any high growth stock, it has a 70 P/E ratio. They could come out with profits that are 20%, and yet the stock could go down, because the market was expecting greater growth than that. For him, it is just too dangerous. It is really difficult to beat the market over time, but you can match the market with less risk, by focusing on companies that are more value priced, and this one is definitely not value priced. There are better ideas out there.

The largest global manufacturer of network switching gear. Crashed in 2000 along with all the rest of the tech stocks, and kind of flat lined at around $25 for the longest time. It is now starting to rise up above the $25 level and you get a nice dividend. Management is really talented. He likes to be in an industry where there are very few competitors, which would be the case here.

75% of what they sell are farm tractors. This has perked up lately and outperformed the market in 2016. Soybeans traded at a maximum limit increase yesterday in the futures market, up 5.5%. That is good for farmers. The other issue that it is not just North American farmers, but farmers globally. One of the big markets for them is Brazil. Commodities that Brazil does well in are not bouncing back yet. The company should do well as long as soybean and corn perk up, and the US and Canadian farmers do better.

North American investors have to be careful about buying European stocks. The British government is fine because they do not withhold taxes on dividends, and dividends are a big part of this company’s story, well over 5%. This has been a dog for the last 3-5 years. Brought in new management a couple of years ago, and finally they are having an effect. Got rid of their cancer division, and are now trying to rebuild that. He likes the stock because they are the 2^nd largest manufacturers of vaccines, and every year they have to redo the vaccine, so it is a drug that is not typically copied. Also, it is a mass-market drug and they can make profits on low margins.

This company patented the device that lets a cell phone communicate with a cell phone tower, and over 50% of what they get paid is from that. Have not been receiving payments from most of the Chinese manufacturers of cell phones. It looks like that is going to change. To the extent that they are successful, the company is going to do well. The free cash flow yield is incredibly high. Big dividend. He likes this company.

Has an aversion in general to retail, but if he were going to buy retail stock, he would rather buy a manufacturer. Retail does poorly in a recession, and it tends to be cyclical. This one is not much of a global player, and a play that should be successful in a declining US$, which will help the multinationals. He would rather focus on those.

DuPont (DFT-N) or Dow (DOW-N)? This is going to merge with Dow, and then split into 3 companies. It is hard to figure out what you are going to get in these 3 companies. There is not enough information yet. He is basically exiting his position and is going to look at the 3 companies that are going to come out, and do his analysis to see if he likes what comes out. If you have a big gain, it remains to be seen if this is going to be ruled as a taxable transaction are not.