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An amazing, incredible success story. He doesn’t own this because the iPhone accounts for about 55% of revenues. Samsung (005930-KRX) is spending a ton of money to come up with competing products, as is Google (GOOGL-Q). When you have so much of your company based on a single product with the company priced to perfection, that implies risk so he looks elsewhere.
In the past couple of years, they’ve been paying a chunk of their dividend in shares for those who wanted it. Just announced that starting in the 4th quarter, there won’t be a choice. You will have to take your dividend in cash, which tells you that many of these large oil companies have figured out a way to make money with $50 oil. Their large acquisition of BG looks like it is starting to pay off. Generating a huge amount of free cash flow at these oil prices. Expects to see significant share buyback in the future.
Most global telcos are faced with stagnating growth. They all have hefty dividend yields and are starting to get their costs down in the face of increasing competition. Not a huge fan of the sector. People are simply unplugging and streaming, which puts pressure on them. A solid dividend story, but not a growth situation.
A very well-managed investment group, doing all kinds of different things. He’s a bit concerned about the impact of rising rates on them. Feels the dividend is secure. Higher prices were paid for a lot of their assets, and he wonders how that responds in a higher rising rate environment. Wouldn’t be a buyer here, but would wait for it to be 20% lower before considering it.
It’s often dangerous to buy commodity stocks when they look cheap, because that often occurs when earnings have reached a peak. This competes with Potash (POT-T), a better managed company with a better group of assets and a stronger balance sheet. To buy any of these companies, you have to be a big believer that potash and fertilizer prices are going to rise.
(A Top Pick Aug 8/16. Up 47%.) All global investment banks are benefiting as interest rates start to rise. This one has done what almost no one else has done, which is not reducing exposure to the riskier trading parts of the business. Their global footprint is almost 2nd to none today. They have good exposure in Europe, whose economy is slowly recovering.
(A Top Pick Aug 8/16. Up 49%.) After years of painful restructuring, they’ve successfully transitioned into a healthcare technology company, and become an earnings growth story in a big way. The focus has been on products that help drive down healthcare costs and getting people out of hospitals faster. They are in the sweet spot of where you want to be in healthcare. Still buying.
Wished he had owned this. Had thought this was only for certain demographics, but the reality is that people of every demographic go to the stores. They are delivering incredible same-store sales growth in a lousy retail environment, because what they sell you wouldn’t buy through Amazon (AMZN-Q). Selling at a hefty valuation, and nothing ever stays cheap forever and nothing ever stays expensive forever.
Many people under 25 are disconnecting from a bunch of different devices, including cable. Streaming as much is they can for free and finding ways to take advantage of wireless providers. This company is a huge free cash generator. Competing in the television environment. It’s basically a no-growth, free cash flow, trying to figure out ways to grow. Has a secure dividend. Expects the whole business to shrink. Dividend yield of 4.95%.
Market. Geographically Japan remains the cheapest of developed markets, and we are finally hearing other investors talking about Japan. Europe also offers good value. There are pockets of value in the US, but it is not a cheap market in general. Heading into a higher rate environment, investors need to be a little cautious. The historical PE of the S&P 500 is 16X earnings, and low interest rates have driven it to about 25X earnings. That’s not to say it can’t go higher, but the Fed is in a rising rate cycle, which implies stocks are going to be less attractive, especially the higher valued shares. In this business, you are either early or you are late. Successful investors are early, so you had better start building up a bit of a cash position or you are going to get caught off side at some point. The whole world is swimming in debt. Consumer government non-bank corporate debt has been going up every year as a percentage of GDP for the last decade. It’s been held together by extremely low interest rates. The fear is that rising interest rates are going to have some impact on government, corporations and consumers. Even if rates move up slowly, we are already seeing slow increases having an impact on Canadian consumers. High-yield bonds are about the only fixed income classes not sensitive to changes in interest rates. In the last 6 rising rate cycles, they actually did well. This is a very short duration asset class. The biggest sensitivity is to default.