COMMENT
What’s pushing markets down? Since October, and especially this past week, fight between earnings and interest rates and the consequent uncertainty. Optimism on earnings side from analysts, giving way to pessimism that earnings will slow down plus rising interest rates. Earnings expectations too rosy going into 2019. Yields are down from their highs, but Fed is conveying rising rates both in US and Canada, affecting equity prices. All this is taking the bloom off equity markets.
COMMENT
Facebook down 40% since July. It’s down, but not as dramatic as earlier in the year. It’s decline is company specific, but it’s also a factor for the tech sector which has come down. A lot of tech companies are doing well, and when they go on sale, that’s a positive.
DON'T BUY
Don’t buy now. Mainly because of uncertainty surrounding steel and aluminum tariffs. Canada’s cyclicals have been beaten down, so there could be value, but economic growth will slow somewhat. This would be a value trap.
BUY ON WEAKNESS
Negative push towards Canada from outside (housing levels, debt), and this includes the banks. But he’s positive on Canadian banks, they earn a lot of money. If housing does decline, those profits let banks weather the storm. Trade at good values, good profits, dividends are safe and valuable in times of market volatility. If you have a position already, you can afford to nibble away at it.
DON'T BUY
Buying opportunity? It has some fantastic brands, but subject to fads, which could have a material effect. But he has some concerns such as high valuation for consumer products company, management structure, and Toys R Us issue in the States. Be cautious on this name. You could be seeing some profit taking right now.
BUY ON WEAKNESS
Making inroads against Amazon. Good earnings, recent acquisition is working. Current pullback is indicative of the market overall. Positive time of year for them. As online becomes a bigger component of sales, that will be reflected in the valuation. A defensive name, a stable investment, so it would go down less in a down market.
DON'T BUY
Earnings looked good. They freed up capital for buybacks. Interest rate hikes are positive, but might take time to come through. Product sales are good in Asia, so fundamentally in good shape. Overhang of US lawsuits, which will go on for a while. Negative Canadian bias from outside of Canada. Stock won’t move until things get cleaned up. Prefers the banks.
WAIT
Add more? Has hung in fairly well compared to other tech. Viewed as more of a traditional tech company. Well managed. Cloud services are growing. Doing all the right things fundamentally. Tech spend will continue to increase. Sees core businesses growing. If you already own it, hold, but wait to add more and see if it comes down and holds around $95.
BUY ON WEAKNESS
Positive on the name. Whenever anything happens in the financial space, Goldman is there. Has more torque than a traditional bank, as its earnings are a bit more leveraged. Keeping money to grow the business instead of returning it to shareholders, a positive. Conservative on loan reserves. Would be looking to add, not exit.
BUY ON WEAKNESS
Recent addition for him. Likes its underlying businesses. Its structure is causing uncertainty, but he sees this as an opportunity going forward. Will be more stalwart than tech stocks. It’s on sale, so an opportunity to add. Sit tight, good things to come with this company.
PAST TOP PICK
(A Top Pick Feb 14/18, Down 4%) Should be doing well in rising rates, but the return isn’t what he expected. Profits good, returning money to shareholders, investing in technology. Expect good things in US.
PAST TOP PICK
(A Top Pick Feb 14/18, Up 6%) Good holding for a long term investor. Pipeline company for water, infrastructure, toll roads. They tend to buy low, make it better, sell it, and redeploy the money. Yield is 4.5%, and yield is valuable in uncertain markets.
PAST TOP PICK
(A Top Pick Feb 14/18, Down 33%) No good news on Canadian energy since the summer. On the flipside, they’re good fundamentally, more disciplined, paying down debt, balance sheets in good shape. Kelt is doing all the right things for the long term.
DON'T BUY
Stocks that don’t meet expectations or miss slightly get hit hard. Q3 earnings missed. Walmart has a better platform. A tough space overall. Prefers Walmart or Costco, or even Amazon looks compelling.
DON'T BUY
Be cautious on this name, especially with the merger, it will take a lot of time to work out. Lots of uncertainty on the US healthcare side. Prefers healthcare equipment to retail, hospitals, or insurance. Size isn’t always your best friend.