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As a long-term investment? A producer of industrial gases is highly dependent on industrial cyclicals, which have had some troubles. They are related to the energy sector. What troubles him is that its multiples have been stubbornly high, at about 20X earnings in a depressed market. There are better places to look.
This is growing very rapidly. The metrics you want to concentrate on are the average monthly and average daily users, and they continue to rise. This is an advertiser’s dream, and Facebook is taking advantage of that with their mobile applications, and using the bolt-on applications that they have. They are also looking into the future. The future of video and virtual realities. There is a great future for this company.
A company that he has always admired. Had a little hiccup a few years ago when Howard Schultz exited, but he has since returned, a great manager who represents the company very well. This trouble has always been valuation, trading in the high 20s in terms of market multiple, which is a little bit too rich for him.
He would characterize this as being the senior representative of the US banking sector. It is the healthiest and has the best reputation. If you want to have a position in the US financials, this is certainly a good choice. On the other hand, if you are looking for some valuation recovery, he would look at Citigroup (C-N), Bank of America (BAC-N) or Wells Fargo (WFC-N).
The difficulty that chemically based pharmaceuticals have had is basically with current legislation. They spend a lot of money developing drugs, and then they go off patent in a few years and they lose that revenue stream. If you look at the financials of all of the majors, basically it is a flat revenue picture, and any cash flow or earnings progress is made through cost cutting. He would prefer the bio side, such as Biogen (BIIB-Q), Celgene (CELG-Q), etc.
If you believe that rates will go up, this is a good place to invest. Insurance companies make most of their money on their bond portfolios. This company just reported and had a very strong report by basically increasing the quality of earnings, and recognizing the fact that rates are not rising. Have also cut costs by 11% year-over-year. They’ve been in the program of exiting non-core assets quite effectively. Given their very attractive pricing against their BV, it is a good place to invest.
(A Top Pick Aug 26/15. Down 2.3%.) After the latest quarter, the obituary has been retracted for now. This is a company and a stock that everyone has an opinion on. It is a highly bifurcated view in that they really love it, or don’t like it at all. You have to remember that this is a company that has been adopted by a great many people as their way of adopting the mobile experience. Thinks that iPhone 7 coming this fall, will be very, very successful. Valuation is extremely attractive, 30% of their market capitalization is in cash, and it is trading at a single digit multiple.
(A Top Pick Aug 26/15. Up 10.69%.) This is really a story about the housing market. There needs to be a lot more household formations to satisfy the population growth. 5 years ago, net margins were about 2%, last year they were 5%, and by the end of the decade he thinks they will be over 7%.
Sold his holdings in Q1 of 2015 because of concerns of the Chinese claiming that the company was monopolistic as well as some issues of patent infringement. The stock has been flat to down since then, and those concerns really haven’t gone away. Apple (AAPL-Q) has been a fairly large customer, but there are rumours that Apple will be using Intel (INTC-Q) chips, for the iPhone 7, at least in part.
He is still positive on this, and it has done relatively well of late. Just reported, and earnings were a little bit soft, but it has had a very, very positive move since the early part of the year. The US’s infrastructure is wanting, whether it is roads and bridges, airports, etc. that they just haven’t poured the money in to refurbish and repair. This is one of the largest commercial construction companies, and should do well.
Just recently reported, and had a very, very strong quarter. This is a pharmacy that fills a lot of prescriptions. It is also a pharmacy benefits manager, so they are a consolidator and a representative for large groups. There are a lot of things going for a company like this, such as aging demographics, and greater US insurance for people.
Markets. The market does not like uncertainty or the knowledge of a troublesome event. As long as it is a known, the market can digest it. We have gone through Brexit, which surprised the market completely, and yet it digested it and moved on. In our current situation, we have to look at valuations being historically a little high, but on the other side the US Federal Reserve, in the market’s view, has its back. The Fed wants to maintain orderly markets with a degree of asset inflation, which gives investors comfort. US earnings, so far, seem to be pretty constructive, but the bar has been lowered. This is the 5th quarter in a row that we have seen falling earnings year-over-year, and there is no question that we are in an earnings trough. However, there are signs, especially on the revenue side, we are moving out of that and it is a little more constructive. Expects a better earnings picture over the next year. Technology and telecom has been doing very well. Healthcare has been in a correction phase, but offers good opportunity.