Today, John Hood and Paul Harris, CFA commented about whether JNJ-N, KHC-Q, BMW-GR, NA-T, CCO-T, DIS-N, SBUX-Q, AMZN-Q, DH-T, META-Q, BCS-N, TWTR-N, GWO-T, BNS-T, TD-T, FSV-T, EFN-T, MET-N, AAPL-Q, VZ-N, MFC-T, ULV-T, CJP-T, ZEO-T, ZUB-T, SPY-N, VDY-T, DOD-N, XBB-T, XIC-T, ZMT-T, ZWE-T, HXS-T, HFR-T, XMV-T, GLD-N, ZPR-T, ZID-T, XID-T, HVU-T, HGD-T are stocks to buy or sell.
Covered Call Correct Value when stock is not actively traded. You can use the Black Scholes model and that gives you the correct price, but it does not say you are going to get it. It does not tell you what the market maker is going to give you. That is one reason he deals mostly with the Canadian banks where there is huge volume.
Markets. The Bank of England just cut interest rates, which was no surprise. Given the situation in the UK where there is a lot of uncertainty over the next 2 years, he expects to see slowing growth over the rest of this year, and probably into next year. There are going to be low rates there for a lot longer than people think. Brexit is a complicated issue, and the issue of very low rates has very big implications globally, and people are not thinking about that. That also has real implications for life insurers.
3 to 10 Year Hold? Lifecos have long tails. It’s not like car insurance where every year rates are redone. Life insurance policies are for 5-10-20 years, so repricing is very difficult for them. They used to invest in bonds to cover liabilities, but can’t do that as easily anymore because rates are so low, which is pushing them into riskier parts of the investment curve. They missed their numbers by about 13%, although Asia did well for them. Not expensive, but doesn’t see how they make a lot of money going forward. He would rather own a bank for that time horizon.
Unlike AT&T (T-N), it took a big risk by putting fibre in the ground. They bought AOL and part of Yahoo. Had a joint venture with Vodafone on the wireless side and bought them out. Thinks they’re trying to create a 3rd stream of revenue from advertising and tie it into their wireless business, and maybe their line business. Trading at about 17X earnings and feels the dividend is safe. You have to see if they can execute on Yahoo. Thinks you can own it and it will do well, but these are the risk factors. Dividend yield of 4.2%.
The Canadian market got clobbered last year. This one has not fully recovered yet. He would not abandon ship. It has not made money because the market has not made any money. This is solid and he would not be selling it.