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He doesn't like this one. The dividend is secure. It’s a massive behemoth bank, but has been struggling to drive earnings growth for years. There's been no organic growth. They may have to make an acquisition, but acquisitions are not cheap these days. If you want to own banks, you are better off owning Goldman Sachs (GS-N) or Morgan Stanley (MA-N). There are better investments elsewhere.
How do you analyse value when there is so much debt? He doesn’t like buying companies with too much debt. With this company, and a number of other companies like it, you have to separate the debt. There are 2 kinds of debt in this. A large chunk of it is related to financing customers who are buying their products. Like many, many companies, a large part of the debt is profitable debt where they make a spread when selling equipment. He calls this the financing debt, which is a profitable debt for them. Xerox is an investment company and their real debt is not actually that great, which is why it has an investment grade balance sheet. This is why you have to dig behind the numbers and look at the notes in the financial statements. He likes this stock. They are back to growth mode again, earnings have started to grow and free cash flow is growing. Companies have found they need document management, and even on the printing side the move to colour printing means they are making a ton of money on expensive ink cartridges.
Not a huge fan of telecom companies globally. However, their dividends are sustainable, so he wouldn't be worried about a dividend cut in the future. However, this has been a zero-growth company, and will probably remain so. They are into cost cutting that will fuel marginal earnings growth, but it is not attractive to him. Rising interest rates will mean these kinds of companies will be negatively affected.
A brilliantly run incredible company and massively successful. He is not buying this, because infrastructure type companies are susceptible to rising interest rates. This is such a creative outfit, that if rates keep going up and there is more downside, he might become interested.
This has morphed itself from making radios, etc. into being a global leader in medical technology. If you go into a hospital room, you will their equipment all over the place. They’ve done a fantastic job after a lengthy restructuring. It pays a dividend, and there should be some dividend growth following earnings growth. He is looking for double digit earnings growth. He still sees upside in this.
Low risk, high-yield dividend fund? Buying stocks just for yield doesn’t make sense. In a rising rate environment, a lot of high dividend mutual funds own a lot of low growth businesses that are interest rate sensitive, that will do poorly if interest rates keep going up. He would not buy one. If someone wants income, they should own fixed income and buy a high yield Bond fund, where you are getting interest income, but those bonds will have maturity dates, and you will be less susceptible to rising interest rates.
(A Top Pick Nov 24/16. Up 55.95%.) The Japanese market remains compellingly cheap. This one is a global business that makes manufacturing equipment for the auto sector and others. There are thousands of great Japanese companies that you never hear about, because they are either making electrical components that are inside all kinds of different devices, or they make manufacturing equipment.
(A Top Pick Nov 24/16. Up 48%.) Has held this for years, and it is finally starting to deliver some returns to shareholders. It is still an incredibly cheap stock, trading at way below the market multiple, with $35 billion of net cash on the balance sheet. They'll be raising their dividend by 10% a year until the cows come home.
He is looking at this, because it has fallen off. Banking is increasingly being run by technology, and this bank doesn't really have the scale to build the same kind of platforms that the major banks do. They don't have the flexibility that everyone else does. Consumers are moving more and more to online, and long-term this is the biggest issue this bank is facing. Doesn't think they are an acquisition target, because they are the only unionized bank in Canada. They are dealing with a small market and are trying to get into niche businesses. It is a real struggle, so he would be very careful before stepping in. It appears cheap on the surface, but the question is what kind of an investment are they going to have to make in their business to be sustainable for the long haul.
Has looked at this so many times in the last decade. The theme is that they are a low-cost producer of uranium. People want to get away from oil and gas, so nuclear power seems to have some long-term future. Every time he sees an analyst report, uranium prices are going to go up in 2 years time, and this has been going on for decades. It never seems to happen. The company is dealing with a CRA issue on the tax side as well, but it would be manageable.
The Chinese market and a Chinese value stock? He doesn't invest in places that don't have a rule in law, so he doesn't own Russian or Chinese stocks. Chinese accounting doesn't have the same accounting rules. It is a state-controlled economy. The state intervenes in many businesses. He would be very, very careful about buying Chinese stocks.
One of the world's great businesses that has been at the top of its game forever. Historically, this has always been a very cyclical business. Their earnings, over time, have been quite cyclical up until the last few years. Chip prices themselves are very cyclical. For a stock like this, you either get in early or wait for the next cycle, so you need to wait for the next cycle.
Market. US bond yields are hitting a 4 year high, which is somewhat bearish for stocks. If everything did well when rates were going down and rates were low, what happens when rates rise and yields go up? It makes borrowing more expensive, buying back shares more expensive and consumers have to pay more. Also, when the risk-free rate rises, it means you need to earn more money on other more riskier assets in order to justify holding them. For the first time since 2006, the dividend yield on the S&P 500 is now lower than the yield on 2-year treasuries. The federal reserve is forecasting 3 rate increases in 2018, 2 more in 2019. If that happens, that brings the short-term rate back to 3%, implying that 10-year bonds yield at least 4%, which is more in line with long-term averages.