Latest Stock Buy or Sell? Make More Informed Decisions!

Market. From a structural point of view, when the market is a Jenga Tower, the internal supports for the market are steadily weakening as the little pieces are poked out. For instance, take the phenomena of the ETF’s. An ETF is a default position and instead of buying one thing, you buy the whole darn thing. Therefore structurally, ETF’s tend to favour the most expensive stocks, which creates a momentum in the market. Stepping back from the tower altogether is a possibility, and given the extraordinary valuations of some of the leading stocks, it probably wouldn’t be a bad thing. The problem is, when is the tower going to fall? Also, are there any investments still around that actually do make some sense and may well survive the tower? His 3 picks today, which have good balance sheets, are cheap and have good upside potential. That is the best anyone can do.

This is a company where earnings forecasts have basically flat lined for about 10 years. Therefore, his FMV calculation has also flatlined and hasn’t really gone anywhere. When those things happen to stocks, the market says “forget about it”, and tend to sell off, which could give you some good opportunities to buy. They will then take a little run and fluctuate up and down around the FMV calculation. This stock is about there now, kind of at the midpoint of its valuation. The highs and lows are $27 and $38, and the stock is threading the needle. If it fell back to $27-$28, he would love to buy some for a trade. If it went to $38, he would sell it Short. This is not a “Buy and Hold” strategy, because earnings haven’t gone anywhere for 10 years, which also means the BV hasn’t gone anywhere. You want to start where the balance sheet is rising steadily, so that if you are standing still, the values are rising underneath you. However, if the values are not rising, and the balance sheet is flat lining, you are not getting richer just by standing still.

When the earnings were growing nicely, the stock was rising and actually went up to 2X BV. However, since that time, nothing much has happened and the earnings have flatlined and the stock came down quite a bit. It actually fell down to its BV at about $19.50-$20. It has now had a nice bounce, because it has a nice yield too. If this fell back to $19-$21, he wouldn’t mind buying it.

Made $1 billion a quarter for the last 5 quarters. Dividend is about 3.3%. Huge footprint in China. Rising interest rates. Stock price has gone straight down. Why is it not being rewarded for good earnings? You are asking the inexpressible. The value is there. Also, with the latest economic numbers out of Canada suggesting an interest rate hike, that will be very bullish for insurance companies generally. He likes the value in the stock.

Trading at its fair market value, so he doesn’t see any upside potential.

Likes this a lot. It is cheap and has a very nice dividend yield, and is trading at a huge discount to his FMV calculation. On a Price to Book basis it is quite cheap. This is the kind of stock we should be investing in.

Broadly speaking, he doesn’t care for oils, or even the gassier oils. Because of their product mix, the earnings forecasts for this company have been rising quite rapidly, although they are slowing down now. It had an enormous run last year, but is now softening away from that as the price of oil backs off to the $50-$51 area.

For the last 5 years, the FMV has been sort of a fulcrum around which the stock has been trading. That fulcrum now is $36. The stock had a nice little run and is now backing off. He wouldn’t be surprised, given the history, that we are going to see further weakness. Wait for the $33-$34 area where you could get a good buying opportunity.

This company has a problem if its mine is going to be licensed by the Greek government, and it is going through all kinds of hoops. Every other day they appear to lose and gain a little bit. If this doesn’t go through, they are pretty much dead. This is “mad money”, not “investment money”.

(A Top Pick Oct 11/16. Up 1.31%.) This gain is primarily due to the distribution. The capital value is off about 8%-9%, and the distribution has basically put you flat. The REIT is a very cheap now. They had some technical problems which are now behind them.

(A Top Pick Oct 11/16. Down 7.53%.) He still likes this, and wouldn’t hesitate to keep on holding it. Thinks that everybody should have about a 10% exposure to gold in their portfolio. He tends to like the leverage in some of the smaller players.

(A Top Pick Oct 11/16. Up 17.29%.) The old high for this stock is quite a bit higher than it is right now, so 17% doesn’t cut the ice for him. Kind of a drop in the bucket.

Change from Toronto Dominion (TD-T)? Royal Bank has a very, very interesting pattern. It tends to trade at 2 valuation breakpoints that he has, about $77 and $111. Currently, it is right at the centre point. The earnings were good, and the bank stocks themselves are cheap. Royal is not as cheap as TD, so TD is his favourite and has been. If you want to be bullish on the banks, then Royal has upside to about $111-$112. (See Top Picks.)

What is not to like about this? It has a low P/E ratio. It has huge upside potential based on its current earnings forecasts, and trades only at about 1.5X BV. Why is it trading down here with all that value? It has huge FMV if you look at the current earnings. However, investors remember what happened in 2008-2009, when the auto industry crashed, and went down big time. Statistics on automobile lending are frightening. If interest rates ever start to go up, it is really going to put a spanner into the works for autos. His guess is that we are at the peak. When it gets there, we typically get a cyclical correction.

Market timing? Is now the time to buy something like Mag Silver (MAG-T) and buy something like Manulife (MFC-T) after a market correction in Sept/Oct? Trying to time this market is very difficult. If the Standard & Poor’s 500 Index breaks 2350, get out of the way. There is probably at least a 20% downside in the market, if history is any guide. That is 2.5X BV.