- Page 1/3
- Next Page
Comment on long term bonds as a stabilizing investment for seniors. He thinks these are a wise investment to reduce risk in a portfolio. Currently, a good quality corporate bond (BBB or BBB+) in Canada that will mature in 5 to 7 years earns about 3.4%. The real return, after inflation, is about 1.5% before inflation. No one will get rich from these. However, in the event of an adverse stock market, investors will be happy to have these. He recommends against buying bonds that mature more than 6 years from now because they do not compensate investors for the extra duration risk, especially in a rising interest rate environment.
Prem Watsa is often described as the Warren Buffett of Canada. He is opportunistic, not afraid of taking risk. Some of his bets have not worked so well but many have. Insurance companies make money in two ways: core earnings from underwriting, and the investment returns from premiums. Warren Buffett initiated a different approach for investing insurance premiums. Rather than putting it into very safe, but low-yielding, bonds, he invested in stocks. Watsa follows this model and Fairfax has benefitted. The recent rises in interest rates are also very positive for all insurance companies because all of them still buy long-term assets. Fairfax has done nothing for investors for a long while, but he is proposing a top pick in the insurance industry today, and believes that the category has promise.
This is a terrific company and demographics for their artificial hips and knees are very positive. They are rumoured to be considering buying Boston Scientific. Because of the high rumoured price, Boston Scientific is up today, and Stryker is down. He thinks that this area is very investible because long-term growth is so good. People should have an investment in this area. The 10% drop in the stock price yesterday piqued his interest, at this price. Price at time of interview was $164.15.
This is the Lazarus story of 2018, back from the dead. They are not anyones favorite stock. Even though they have sold off a lot of assets, they still have a lot of debt on their balance sheet and he called their profitability dubious, going forward. They have cleaned up a lot of their mess but they have a long way to go before becoming the kind of stock that he would consider for his type of portfolio. The debt burden in a rising interest rate environment, with many maturities that must be rolled over, poses too much risk.
This is an interesting stock to consider in the face of current discussions of tariffs. The United States sugar industry is heavily protected, and Rogers is protected in Canada. It is one of two main producers, a duopoly behind a tariff wall. He has wondered how long that wall would stand. With Trump in power, he thinks this wall will stay up for longer, making this stock more attractive. However, sugar is a low-growth or no-growth commodity. The social trend is against it and the younger generation consumes less of it. The yield is high (about 6%) and will probably not come down, but it is strictly a yield play. (Analysts' price target is $6.25)
This used to be the 800 pound gorilla of the chip business but then chips became more commoditized. Now, Intel is getting its mojo back. They have rediscovered innovation, new products are gaining market share and the stock has risen sharply after doing nothing for a long time. He doesn't expect them to ever regain the iconic status that they had before because too many people now know how to make good chipsets. However, he thinks the stock today is worth considering.
Gold has always had an outsized place in Canadian investors' minds, even more than in the United States. However, gold now competes with other quasi-moneys, like crypto currencies. Many people prefer the newer alternatives, seeing gold as old fashioned, maybe even medieval. He has no use for gold in a portfolio and does not see it having much value as a hedging instrument. He has been zero-weighted in precious metals for a long time.
(A Top Pick May 17, 2017. Down 39%). This has been a disaster for him. The market has decided that people will never go to movies again, which is wrong. The number of people going to movies has gone down a little bit but box office revenue has been steady. Cineplex has additional revenue streams. They have rec rooms, like David & Busters in the United States, which is up significantly. In addition, Air Canada flights show movies from Cineplex, people watch Cineplex news feeds. Cineplex also gets more value add from its theatres by selling VIP seats where you can order a glass of wine and a sandwich. Cineplex is also hosting video game tournaments in its theatres, packing people in to play or watch. This can take the average ticket from $15 to $50. He thinks the investment public has gotten Cineplex wrong and thinks the stock will rise back to $40 or $45. He is still buying it.
(A Top Pick May 17, 2017. Up 45%). Magna is invested across many different manufacturing platforms. They are no longer just in auto parts. They do complete vehicle assembly and have a foothold in autonomous vehicles and AI. They have an integrated factory platform across North America with almost equal numbers of plants in Canada, the United States and Mexico. He thinks they are trading at a modest price to earnings ratio, like all other auto companies. They just aren't getting enough respect.
He does not own any oil companies. He is concerned about environmental groups and indigenous peoples who can slow down major energy projects. He believes that more pipelines will be built, but he is doubtful that they will be built in a time frame that is helpful to today's investor. He thinks it could be 3 to 4 years before the pipeline hits the coast.
This is the iconic company of the 21st century. You can't have a discussion about retail without talking about Amazon. However, the debate inside his company is whether this great company is a great stock. It is hard to measure its profitability now and in its future, and therefore hard to determine whether its price is high or low. They don't make a profit, they may never pay dividends or buy back shares. Normally, shareholders buy a stock to gain a piece of the company's profits, which come back to the shareholder in some way. Amazon operates outside of this model. The jury is out, for him, as to whether this is a good stock or not.
