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Market. He sees the market being in a tug of war with the Trump Administration creating volatility with trade tariffs globally. He thinks the market is continuing to bet this is all just short term noise. A year ago he was very cautious about interest rate sensitive stocks, which conflicts with the need for yield by investors. They were lightening up on telcos and utilities and feels there is still pain to come in these sectors.
Deploying cash now. He would focus on mid-cap names to avoid noise with tariff risks. His company portfolio holds 60% mid-caps. From a currency perspective to the US dollar, he doesn’t see much to protect against potential currency exposure at this time. He would suggest employing a dollar cost average approach for entry. He would caution purchasing bonds, as some high yielding ones trade more like equity than bonds.
The chart makes this a rock star, although it has paused recently. This business is a pure momentum growth stock that always trades at a rich multiple – it is always expensive. He tends to stay away from these stocks as the risk is too great of buying at the wrong time. It only pays less than 0.5% yield.
Their business model is unique as the profit margin is only half of their competitors. Their memberships are a nice recurring revenue stream. If the economy slows, they do not have the ability to cut prices. He has stayed away because of the high multiples. The P/E ratio has not traded below 25 times for the past 10 years.
This is down about 15% this year. From an entry perspective, it is looking more attractive; however, the P/E is still around 19 times. The yield is also supportive. The company has been focusing back to its core brands and this will take time. He would price in some further downside, but sees this as a time to step into 1/3 of your target holding. Yield 3.5%.
This stock needs to be evaluated in the broader outlook of the macro market drivers. He thinks this is one of the better national banks, because of the balance between retail and merchant banking. Goldman Sachs lacks the retail side, so their earnings are lumpy, for example. He expects a dividend increase. He has stayed away in general, favoring to cherry pick the regional banks in niche markets.
Whoever owns it, say they like if for the dividend. He would caution investors about wanting to own this merely for the dividend. The stock has done nothing and he thinks you would do better with a lower yield stock, but with better growth potential. He is not interested in this space at all as he thinks the dividend could be under pressure. (Analysts’ price target is $56)
He owns this and recommends it as a holding you can feel comfortable with over the long term. It has a low beta with the market, which makes it less volatile during downturns. The stock has appreciated like a small, riskier growth stock. He likes the dividend and expects 2-3% share appreciation annually. Yield 5%. (Analysts’ price target is $59)
He is thankful this continues to be a Canadian company as there are fewer in the Canadian space left to invest in. He is watching it again, now that it is down 22% this year. He sees it as still being a little expensive at 19 times earnings. He would take an initial 1/3 position at these levels. Yield 3.25%.
