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COMMENT
What sector would you select to invest money now? - Financial in the US is in a bear market. People are worrying about yield curves and all that non-sense. If you have 5 years view, being paid 3plus % yield with a growth above market rates and a strong balance sheet and diversified platforms. Quality businesses that are on sale and trading at reasonable valuations. You can expect to make 10%/year over the next 5 years.
PAST TOP PICK
(A Top Pick Jul 25/18, Up 28%) Still owns it as they buy things for the long term. A consulting company. A soft play on tech growth. They are hired by everybody to implement technology. Funny stock because every time they announced earnings, even as they are good and beat expectations, the stock falls by 5-6%. Buy it after earnings.
other services
PAST TOP PICK
(A Top Pick Jul 24/18, Down 11%) Just added some today. It had performed better than other banks in the US until just recently. A great opportunity to pick up the stock. They are working on their issues. Yield is 3.5% and it is trading at 12 times earnings. Their hands are tied behind their back but he thinks that is going to end in the second half of 2019 and they are showing good growth and profitability. You can't go wrong.
banks
PAST TOP PICK
(A Top Pick Jul 24/18, Down 19%) Great company. Exceptionally profitable. Trading at 7 and 1/2 normalized earnings. Once they get over the big scandal. That will cost them $2 billion and they made $13 billion last year in profits. The best company in taking advantage of dysfunctional markets in the world. Global leader in investment banking. Pristine balance sheet. Good value. Just added to his position.
investment companies
funds
COMMENT
Opinion on Canadian Banks - They own Bank of Nova Scotia (BNS-T) which just bought recently. Canadians are heavily exposed to financials and real estate. Canadian Banks have to find new avenues for growth as they just can't keep lending to Canadians that are one of the most indebted people in the world more and more money.
COMMENT
Do you believe we are entering into a bear market ? - The S&P 500 is not down 20% so it is not technically in bear market territory. But who cares? In certain areas we are. But profits are going up, interest rates are low, the economy is strong, employment is strong and stocks are trading at 14-15 times earnings. That is not unreasonable. Don't seem to see any sign of a recession in the next 6-9 months. Could it go lower? Sure, we could have a flash crash. He invests in good companies for the long haul. he doesn't have a clue what is going to happen in the next three months but you can buy some stocks and make a decent return with a five year time horizon.
DON'T BUY
Was the decision to cut the dividend a dumb move? That was necessary. Management is like a gang that can't shoot straight. They destroyed this business by making an acquisition in the US. Very disappointed investment. They sold it at around $20. They are trading utilities companies like day trading. Only investment bankers are making money off this company in the last 5 years.
oil
gas
DON'T BUY
A company that is an investment banker's Christmas present everyday. They pursued a growth story and sold off assets to finance that growth. A lousy performer. They have destroyed value by boosting dividend. Maybe they turn the whole thing around. Other than financial engineering there is no reason to own this company. Lousy balance sheet. They have grown so much and portfolio managers own so much of it, they need to find new investors and he doesn't think they will find new investors.
oil
gas pipelines
COMMENT
One of the best operators in Canada. As long as the price of crude is above $60 is going to be fine. Canada has a severe problem. We are not a country, we are a bunch of people with different interests. We can't build things. The energy business is a tough business. A quality company. Generates huge free cash flow. He prefers Cenovus Energy (CVE-T) that has more leverage and as it has a cheaper valuation. It could be a potential target for CNQ to buy at about a 30% premium.
oil
gas
BUY
As long as you believe that energy prices have to trade at some level above marginal cost globally, this company is a good purchase here. Well funded. Trading at 3 times normalized earnings. Everybody hates it. International investors are not coming to Canada as long as they don't see we can work as a country and sell our product and find more of it.
oil
gas
WATCH
A tremendous Canadian success story. The only concern is that they are growing so big and it gets to a period of time that you start losing economies of scale. The other thing is the funny share structure that the family wants to change and investors are not that happy about it. He would be cautious.
food stores
TOP PICK
They owned it for years and years and years. This is a great company. Trading at 13 times earnings. Strong balance sheet. International company. They allocate capital prudently. They recently acquired Craftsman Tools from Sears. Down 40% from its high. He didn't sell because they would have paid a huge capital gains. Offers tremendous value. They bought some more recently. You can buy it here now and own it for the next ten years. (Analysts’ price target is $149.44)
misc industrial products
TOP PICK
Yield is now 3.2% trading at 11 times earnings. Was at $120 not long ago. They generate so much excess cash flow from their earnings that could probably return 4-5% of their capital in terms of stock repurchases. One of the best-run banks in the world. International presence with a lot of opportunities. (Analysts’ price target is $123.85)
Financial Services
