Today, Bruce Campbell (1) and Brian Acker, CA commented about whether NFI-T, GMP-T, TRP-T, DIS-N, HR.UN-T, MRK-N, CSH.UN-T, AQN-T, HBM-T, BNS-T, BCE-T, STN-T, ENB-T, MG-T, DOL-T, EXE-T, MFC-T, TD-T, POU-T, TV-T, ATD.B-T, CSCO-Q, BAC-N, INTC-Q, TECK.B-T, SHOP-T, VRX-T, AMAT-Q, WJA-T, ATRL-T, ARX-T, ACB-T, ALA-T, INTC-Q, AAPL-Q, C-N, ATRL-T, SU-T, BRK.B-N, CVS-N, GE-N are stocks to buy or sell.
Trump is preventing better returns. His tweets pressure the markets. Calm would raise the markets. A recession is still more than 12 months away, and so the market can still rise a bit more. Start to hold a little more cash for opportunities. Underperformers are financials and the interest-sensitives, but these have been done underdone. Be in a little less tech and a little more defensive. If you can take partial profits from say Facebook, then buy a dividend-paying stock. Look at reset preferreds. The Canadian market is roughly flat for 2018 (January highs) while energy has been improving from the gruesome lows of the past few years, though $22 is the Canadian discount. That said, Canada will benefit from rising oil. Big cannabis stocks need an awful lot of growth to justify the valuations. The smaller weed stocks hold more opportunity, because they can be taken over.
Market. The US dollar is in a bull market. He expects the US dollar, and all assets priced in US dollars, will go substantially higher. He expects this to continue for a 5 to 7 year period. Things look good in the US market. He recommends ignoring the Trump tweets and focusing on the statistics. Fewer companies are participating in the growth than he would like. Financials are going sideways as his models of their value increase. He uses Model Price Theory (https://modelprice.wordpress.com/) and sees rises in interest rates as bullish. He thinks that Europe’s economy is getting substantially worse and that Deutsche Bank’s woes will cause broader problems in Europe.
It bounced a little today with its plan to spin off health care and oil. His model price for GE is $12.81 and the stock closed yesterday at $12.75. He expects the S&P to issue a negative review on GE’s debt as GE’s balance sheet changes. He would not buy here. He wants the balance sheet to shrink much more before considering it.
Model price is $83.03. The stock is at $70.50 today. CVS bottomed out. He expects the high to be about $87. However, any time Amazon can announce again that it is going into the pharma business, CVS will drop. Its downside risk is about $63.60 and he would buy at that price. (Analysts’ price target is $50.41)
Comment on Canadian Banks in the United States. In general, American customers tend to like Canadian banks, so they are positioned to expand there. He would buy the Canadian banks on a pullback but would not buy them today. The upside is not as strong as it was in the past. All over the world, everyone is short Canadian stocks, including Canadian banks. Our debt and valuation are seen as high. So, for example, he would buy TD at $66 compared to its current price of $76.74.
He likes it and it has moved a little lately. They've settled a few lawsuits and are putting their problems behind. Highway 407 has been a fantastic asset for them. SNC has touched $60 for the first time in a while and he sees 10-15% upside in the next 12 months. Be patient. Over the next few weeks you could buy this for a dollar or two lower.
(A Top Pick August 4, 2017. Down 4%). This rose to $80 in January and is down to 65.52 now. It is struggling at EBB-2, well below his model price ($73.97). The US stress tests will come out this week. He expects dividend increases, which is essential for this stock to move higher. The company pays only about 20% of its profits, compared to 40% at Royal Bank. So he expects a pop soon. However, he thinks that what is happening in Europe will affect American bank stock prices. The European banks are at multi-year lows. However, the large American banks are very well capitalized and in much better shape than the Europeans.
He sees cannabis as no different from the Internet craze in the 1990’s. Between now and October, he expects all these stocks to crash. The equity market is fueling this industry. Enthusiasm is driving the price, not fundamentals. In October, valuation will start being driven by fundamentals and the fundamentals won’t support the prices. The group will go down and then a few survivors will rise, but we don’t which ones yet.