Today, Cameron Hurst and Christine Poole commented about whether JPM-N, RY-T, FTS-T, PBH-T, AC-T, VET-T, GIB.A-T, CRM-N, FCR-T, MAXR-T, ALA-T, BAC-N, DIS-N, ENB-T, XYL-N, TD-T, GOOG-Q, V-N, MA-N, HCG-T, CSH.UN-T, NFI-T, L-T, FDX-N, ETFC-Q, IHI-N, MSFT-Q, RTX-N, IHI-N, ALGN-Q, NFLX-Q, PAYC-N, GIS-N, DXI-T, VGRO-T, TWTR-N, GOOG-Q, MSCI-N, BAC-N, IAI-N, LULU-Q, DPZ-N, MCD-N are stocks to buy or sell.
US economy. Third longest expansion in US history of 108 months or so. Slow, sluggish expansion with GDP growth around 2-2.5%. Going forward, she looks at sentiment, manufacturing and services activity. No signs of a recession in next 12 months. Thinks we still have another year or two of runway, though you still have to monitor. Most importantly, consumer spending is very healthy. Consumer spending accounts for 7% of US GDP, unemployment is low at 3.8%, they’ve de-levered, and house prices have gone up. Canada household debt is much higher than US. Canada’s 5.8% unemployment is historically low, but our household debt levels are higher. Rates are creeping up, which will impact those debt levels.
Equities. Still likes equities, despite volatility. S&P 500 still 3% off highs in January. US companies have increased both bottom line and topline growth, and tax reform was another catalyst to add to earnings growth. Tax reform hopefully will encourage capital spending, providing more widespread economic activity.
Reasonable in terms of a longer term outlook. They sell products that everyone needs: food, and pharmaceuticals and beauty products through Shoppers Drug Mart. Good positions and locations in both those segments, which are critical for those types of businesses. Experienced operators. The industry is in transition regarding goods delivery and pickup. They have click and collect, and have introduced online delivery. Some headwinds with minimum wage, which they’re now overcoming. Earnings growth not that stellar. Going forward earnings should be in mid to high single digit range. Stock is reasonably priced at around $65, with a bit of a yield.
Is this a hold over next year or two? Well positioned in the bus manufacturing industry, but their after market business has been a bit soft. Longer term, the sector will do well. Demand will be decent for the next year or so. Valuation is too high right now. Would take a look around $50. (Analysts’ price target is $67.)
Have held it for a number of years and continue to like it. Would be buyers at these levels below $15. Demographics favour this industry. Most of their revenue comes from private pay, not government. Offer all levels of care -- long term, assisted living, independent living. Strong and experienced management team. Good organic growth plus acquisitions. Company got out of the US; feel they have enough opportunities for growth in Canada. Yield about 4%.
Worst is behind it, with funding in place. She’s never invested in this sector. New mortgage rules as of Jan 1 have affected this sector more than Canadian banks. Best of growth in the Canadian housing market is behind it. Mortgage volume is slowing and they have to be careful of their mortgage sources.
Visa (V-N) or Mastercard (MA-N)? Likes the electronic payment space. Cash and cheques are still the predominant form of payment in many countries, so there’s lots of runway, even in developed markets. Bought Visa a couple of years ago and is happy to keep holding it. Benefits of buying Visa Europe will come through this year in terms of integration. There are opportunities for both companies in terms of market share -- no reason to switch from one to the other.
Visa (V-N) or Mastercard (MA-N)? Likes the electronic payment space. Cash and cheques are still the predominant form of payment in many countries, so there’s lots of runway, even in developed markets. Bought Visa a couple of years ago and is happy to keep holding it. Benefits of buying Visa Europe will come through this year in terms of integration. There are opportunities for both companies in terms of market share -- no reason to switch from one to the other.
He likes the demographics, higher global consumer spending and it has stable end-markets. It will see new product launches.