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This is very involved in treatment for diabetes. Has stayed away because of the pricing of insulin. Insulin prices have increased almost every year sequentially for the last 20 years, which is incredibly difficult to understand, given the strides that have been made in increasing yields in the biotech fermentation process to produce the drug. Every time new entrants come into the industry, they seem to take the same pricing increase every year. In Europe, insulin is sold at a fraction of the price it is sold in the US. The US president could sign an Executive Order at any time, allowing imports of drugs from the European market, which would collapse the profitability of the industry. He doesn't understand the pricing dynamics.
He doesn't feel this could add a lot of value. It’s very hard to have a strong view. If the sales of the iPhone 10 are better than expected, then there is going to be a price mix effect that could cause them to beat expectations. The problem is, if the price and volume are not as good as might be, then it is fairly valued. The question is, how much upside is there if you get it right. Expects not enough to be comfortable in believing it is going to beat the market. Wait for them to finish the successful product launch and for people to get bored, before getting involved.
(A Top Pick June 19/17. Up 0%.) Probably the leading producer of plastic and aluminum composites. They also make core materials like balsa wood. Prospects are very strong, simply because over time more and more composites are adopted within the end-use industries. They are primarily for transportation, construction and wind power.
(A Top Pick June 19/17. Up 11%.) This is the original Hewlett-Packard business founded in a garage in the 1930s, producing test equipment for the defence Department. Very well positioned because it is a very concentrated market for producing equipment for testing defence electronics. This area usually grows at twice the rate of the defence budget. Also, the development and deployment of 5G wireless requires a lot of their equipment, and he believes they are the leader.
(A Top Pick June 19/17. Up 1%.) He was involved in this for a very long time, but just exited recently after their most recent quarter. It’s the world's low-cost producer of eyeglass lenses and one of the largest producers. Exited this, because they had a very strong year in their semiconductor related businesses. As the IT part of the business slows down, the market doesn't want to pay for healthcare businesses.
Has avoided this, but can see why people are interested. There is the view that the post office is going to have to raise package delivery prices. However, the discussion that is important is the complete change in logistics Amazon has created. Feels this and Federal Express are organized around the idea of hubs and moving distribution through central hubs. Amazon is arranged completely differently, building warehouses in large cities. He sees incentives for retailers going directly to consumers to try to take the line away from companies, and try to turn it into a local P&D business.
The largest producer of natural food colours as well as the largest producer of granulated garlic and onions. They also make dies used for ink jetting for tiles and fabrics. This industry is consolidating. If the equity continues to trade sideways, he wouldn't be surprised if another company had interest in it.
A very good company. The key reason he doesn't own this is that he doesn't like the fibre business. A lot of people believe no more fibre will be necessary incrementally. As we increase productivity of multiplexing over fibre, we haven't had to install it in the same fashion as in the past as broadband grew. Their display business bothers him a little, because it is a business where customers demand price cuts sequentially. He doesn't like businesses that have to cut prices. What would interest him is if their ion impregnated glass (gorilla glass) can be used in automobiles. It would substantially reduce the weight in a car.
His recommendation would be to stay away from all telecommunication companies. This is probably the most losing industry. It was 10% of the S&P 500 in 1970, and it is only 2%-3% now. Thinks it is actually going to disappear in the next 12 months. Index providers are going to sweep it under the rug, because it has been such a foolish industry to invest in.
He wouldn't invest in any automotive company, because we are already running ASAR (a seasonally adjusted rate of production) in the US of 16 or 17 million vehicles. Your best-case scenario to get to 18 million vehicles is extremely limited. We’ve also seen producers do a lot of subprime financing in order to place cars, which implies they have had to scrape the bottom of the barrel to find demand.
He would recommend staying away from this. If you have a choice of where to go in banking, the right place right now is the US. They are getting regulatory relief. Expects there will be more freedom in the US to make loans. Tax reform is very positive economic development for the US banks. Also, this bank has the old DLJ, and you would have to love the high-yield bond market, which is a big part of their product mix. He would rather be involved where investment banking is broader based with more exposure to equity.