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Currently there has been a ratcheting higher of expectations for a rate increase, which would be positive for financials. People think a higher rate will push the yield curve on the short end higher, which should reflect higher inflation expectations in the out years, lifting the long end of the curve. There is a feeling that everyone is currently dramatically underweight on financials. There is probably some short term life to financials. Doesn’t feel rates are going to go high quickly. He holds a neutral to bearish views on financials.
One of the big, global energy plays. It does look like energy is turning, which is the single most important driver for this company. Prefers Schlumberger (SLB-N). Feels the theme is very early, but the right stability factors seem to be in play. All these companies have technical formations that gets him interested. (See Top Picks.)
Chart does not look strong. You have to validate as many factors as you can to raise the odds of success, and he does this by using technicals. This company gets tripped out of his process by the technicals. A great company, but not a great stock right now. This company is not really strong in the higher growth segment. 4.25% dividend yield.
You are dealing with a staple, so you have a rich valuation. Likes their diversified model with the retail component and the PBM (Pharmacy Benefits Management). They put up very consistent double digit growth. Trading at 15-17 times, so you are paying for it, but you are also paying for its consistency. He would be very comfortable with this name.
This was one of the driving forces behind the upgrade in content on TV and they did really well. From his perspective, it looks good. Trading strongly and has come off the bottom. Because the stock had such a huge run last year, it probably needs some time to work that off, and might become investable again. If you are nervous, this is the kind of name that you could trim back for now, and then on a break out go back in.
Likes their DirecTV acquisition the most. It gave them a lot of different synergies, expense and additional revenue to wring out. Your biggest risk right now with telecom is interest rates. These companies are very sensitive. Pays a 4.5%-5% dividend yield. This is really a call on rates. If we have low rates, this will continue to chug higher, but if they accelerate, this is going to get hurt.
A big drug distributor. Part of the problem is drug pricing, and generic pricing has become a bit of a political issue as well. Have a sustainable and growing dividend, but now it is in a situation where even if management gets it all right, there is a huge investor turnover to work through before starting to make your money back. He tends to avoid these because the return over time is not very good.
US retail. This company is pretty good. Had an earnings miss recently and the stock was beaten up a little. Has moved into a negative earnings revision cycle. Feels the company is pretty well run, but the industry is running into some strong headwinds. If you own, he would recommend using a stop loss.
Market. Feels the US bull market is getting mature, and you have to be a little more selective, but there are spots that are working. Something interesting that is playing out right now is that there are currently significant potential negative outcomes that people are fussing and worrying about. Donald Trump has been sabre rattling like crazy in a horrible and corrosive campaign. That is very destabilizing for markets. If he becomes US president, he has no experience, no political pedigree, and doesn’t know how to make Washington work, which is a bit nerve-racking. Markets feed off certainty better than uncertainty, predictability better than the opposite. He doesn’t think it will ultimately happen.