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Market. The current market turmoil does not bother him that much because of his portfolio. He was going to say that but for most participants in the market he wants to be more respectful of volatility. Bottoming is a process. It will only be proven with what goes on from here. This was an area where one would expect a bounce. What counts is what happens next. He would like to look for a bottoming process from here which includes the credit markets stabilizing. The banks should go sideways from here and not down. He is optimistic. Focus on owning higher quality companies for the longer term.
COMMENT
The US Fed. If the Fed wants to communicate a message clearly, they know how to do it. He thinks they want to continue to run off their balance sheet and to continue to hike. It should be no surprise that volatility is increasing. He thinks they want to have dry powder. He thinks they should be more moderate than they are. The corporate world has never had more cash. He has no corporate bonds in his portfolio. Cash is a much better asset to barbell a portfolio.
WATCH
It is on his watch list. It is a very good company. He sees it as an insurance company because of its history as to how it trades. There is a higher level of catastrophic losses recently. He prefers Progressive here. We are decelerating from 4 percent to 2 percent economic growth. It is just not a super timely pick.
insurance
BUY
It was too cheap because the whole pharma industry was out of favor. This whole industry is not out of favor from politicians. This has a better balance sheet, margins, and manufacturing costs. He continues to see it doing well unless something impacts livestock herds or companion animal populations.
Consumer Products
DON'T BUY
The ruling today for $135 Million is a trivial amount. They are one of the best banks in the world. We have 200 years of history with markets and they have been under-performing markets except for a few 3-5 years periods. Interest rates right now are not good for them. Credit provisioning is relatively low and can only go up. But we could have years of strong credit performance. JPM-N is definitely a great company it the question is whether to own banks. Big banks are growing somewhere between 0 and .2 percent.
Financial Services
DON'T BUY
Can it go bankrupt? It was one of the first to see widening credit spreads. They have not been doing well since the crisis. They have been more negatively affected by the change in banking business mix than the rest. Rhetoric around trade is going to ratchet up and down but global trade is still intact.
banks
WATCH
DIS-N vs. MFST-Q. DIS-N is a fine company. He has been examining it carefully for the last few years. He likes the acquisitions but has not pulled the trigger. They intend to build a platform to compete with Netflix and he needs to know what that will cost will be in order to project future revenues. He owns a lot of MSFT-Q and prefers it. It is an easy stock to own because they are one of the three leaders in cloud computing. It will have recurring revenues. It will better survive a recession.
entertainment services
BUY
DIS-N vs. MFST-Q. DIS-N is a fine company. He has been examining it carefully for the last few years. He likes the acquisitions but has not pulled the trigger. They intend to build a platform to compete with Netflix and he needs to know what that will cost will be in order to project future revenues. He owns a lot of MSFT-Q and prefers it. It is an easy stock to own because they are one of the three leaders in cloud computing. It will have recurring revenues. It will better survive a recession.
computer software
processing
