Latest Stock Buy or Sell? Make More Informed Decisions!
Today, Darren Sissons commented about whether KNEBV-HEL, INFY-N, HSBC-N, NTDOY-OTC, KXS-T, WEED-T, CSCO-Q, ORCL-N, VOD-Q, V-N, NVO-N, CSX-Q, TCEHY-OTC, INTC-Q, QCOM-Q, LYG-N, BX-N, CVS-N, BABA-N are stocks to buy or sell.
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This is a play on the underlying social media, logistics, delivery. In terms of the Chinese economy, it has a highly dense population, and if you want to deliver products, you just can’t go to the big box stores, so you get a delivery price which comes with the Ali Baba story. The valuation is very steep, and if it were a little lower he would potentially take a position. A very binary story as far as valuations go, but he recognizes it as a quality company.
In many cases this is a Trump Administration story. Drug stocks have come off significantly, along with the companies that sell drugs to the American consumer. There has been a recovery in a lot of the drug stocks, and he’s not 100% convinced that Americans want to give up Obamacare. Ultimately, this is a story of drug price inflation and the attempts of the government to rein costs in. Longer-term, it is an interesting story, but a very thin margin business. If you get a small drop in profitability, stocks tend to come back significantly. This may be a buying opportunity, but for him the margins are a little skinny and not on his radar.
Private equity works by you having to put capital in, but after a period of time, they have to give it back. A lot of money owned by companies like this, can effectively be under risk of having to return it. If they can’t raise additional capital, their sustainability longer-term of the dividend, is somewhat in question. The 2nd issue is that you have a business that really makes all its money by buying when there is a recession and selling when there are frothy markets. At this point, we have very frothy markets. Anything that needs to be sold probably has been sold, and moving forward, the likelihood of performance improving may be modified lower. This is a kind of company you want to buy during a recession.
The overriding issue for them is that it is very much a UK centric story. In the context of a BREXIT, there is likely to be some downside on GDP growth for the UK economy, maybe 5% per year for 4 or 5 years until everything normalizes. Thereafter, there might be some growth. In the interim, you will likely see higher interest rates for banks, but you will see contracting earnings opportunities. You want to look at banks that have UK exposure, but also outside growth. He would suggest looking at HSBC Holdings (HSBC-N) or Banco Santander (SAN-N).
The big issue is the litigation story. He believes they are going to court with Apple (AAPL-Q). This involves 6 patents and one company on one side with a huge balance sheet ready to go to war, trying to cut the profitability on a company that they believe have anti-business practices. This is one you just want to stand on the side and wait to see what happens.
A company in transition. They did very, very well on the back of the desktop. As desktops became more pervasive, the stock ran up, but the world moved to a more mobile environment, and their ability to take a portion of that revenue has slowed. Great balance sheet and great story, but it is going to go through a transition into an environment where its chips aren’t as expensive. The longer-term story is of much smaller growth. He is a net seller of the semi space at this point. He would suggest Analog Devices (ADI-Q), on a market pullback.
(A Top Pick Jan 27/17. Up 37%.) It helps diabetes and is the #1 diabetes company globally. They’ve added an $800 million buyback, which will be completed by the end of October. They’ve also had a number of interesting announcements on the pipeline side. Good strong balance sheet.
All European telcos are basically having the same thing that is happening with US telcos. We are in an environment where people are starting to chase growth and we are at the top of the cycle. Companies that produce safe and steady dividends are no longer sexy. However, the problem between Europe and the US is a very different story, and sector rotation doesn’t really apply. Europeans are now starting to grow revenue as well as earnings. They have top line growth which we don’t have in North America. There is also expansion and acquisitions going on. The largest market for this company is Germany. The dividend is safe. If we see more BREXIT noise occurring, buy this on a dip.
A big software tech company, but hasn’t grown organically. Basically, it grows by acquisition. His question is, who are they going to buy next. It is getting to the point where it has been a great rewarder for shareholders, but it needs to continue to acquire. Valuations are very rich. Pick this up when there is a little more downside on it.
This did very, very well when we had the big expansion of fibre globally. Since then, they really haven’t done a whole lot. Huawei has come out of China, and has become a very painful competitor for them. Basically, Cisco just serves the US and some other markets to a lesser degree. He sees it as a challenged story, and it has to figure out where the next growth path is. The 3.5% dividend is safe, but he doesn’t see a ton of upside here.
He just doesn’t see the hype around marijuana stocks. Students have been growing this for generations, you can grow it in your backyard, etc. Opportunities are really in the supplies, such as a lighting and hydroponic companies, etc. The companies are probably going to be bought by tobacco companies, so he would suggest buying a tobacco company and collecting the dividends while you wait.
Market. Markets have become politicized where we have seen changes of government in most countries. Everyone is starting to see their populism moving into the markets. In Canada we have the impact of the proposed tax reforms, which is not being received well by a lot of people. Those kinds of dynamics are occurring across the globe. Quantitative easing has definitely helped markets across the globe move to high levels.