TOP PICK
The US dollar rolling over is good for commodities. Long term the cost of bring on new supply is so high that supply is effectively capped. There is a miss match in supply and demand and the previous glut is slowly coming down. (Analysts’ price target is $5.57)
TOP PICK
5 times forward earnings. They did an acquisition and took on some debt and got bad press. (Analysts’ price target is $39.57)
TOP PICK
It has come down such a long way yet is a good growth story. It trades at 10 times forward earnings. Everyone is worried about AMZN-Q coming in but he thinks it is overdone on the downside. (Analysts’ price target is $227.21)
COMMENT
2018 recap: few saw the difficult Q4 and December especially coming. The Nasdaq was down 3% while last year it was up 28%. The TSX fared badly. What next? He doesn't think 2019 will be *that* bad. Sure, December was rough with no buyers and everyone selling at once. It's wishful thinking to feel US-China trade wars will just disappear. This is the new normal. Expect volatility. China won't bend under US pressure. US and China are battling over the 21st century. The line in the sand has been drawn. Can investors get used to this situation for the long term?
DON'T BUY
Oil forecast? Used to have a great a balance sheet then levered up at the wrong time to make an acquisition around 2014. It takes a long time to unwind. Some say you can get great torque on BTE, because an upside in oil means an upside in earnings, but it's not worth the risk. Oil price is a little cheap now, so you can dip a toe into oil now. But look for good balance sheets in a company. It's rough to see the WCS differential so wide, but the reason is the lack of pipelines. Things can't get worse, but it can go away as soon as you start building pipelines. Also, demand growth in oil is okay actually.
COMMENT
A large Brazillian iron ore company. Really volatile. Really cleaned up their balance sheet with decent debt-to-earnings. It's starting to recover. Don't expect a huge pick-up on iron ore prices, but going steadily. If the USD suffers serious weakness, then the price of iron ore will rise and VALE, but he doesn't see massive U.S. dollar weakness in the short term.
COMMENT
2019 outlook He's always had a good EM allocation. He buys ADRs in nations he wants exposure to, but recently he's been buying American stocks with that international exposure, like Starbucks. He's been conservative with cash, buying a little during the October dip, but only a little. You can't ignore the Chinese consumer, like Canada Goose opening a store in China.
COMMENT
A lot of the pain is now behind them. But don't expect a quick recovery. They just cut their dividend and are selling their Canadian divisions to reduce their heavy leverage. They might be fine. But this could be in $10-15 for some time. It takes time to de-leverage. But the worst is certainly behind them.
DON'T BUY
Used to own it. He sold high-dividend stocks in 2014-16, expecting interest rates started rising. Utilities are levered up, too. IPL has come down in price a lot so he's interested, but he expects interest rates to rise, so he wouldn't look at utilities for longer-term growth.
DON'T BUY
The auto space is challenging. He sold off his car stocks a while ago, because of Uber and Lyft. There's a strong case to be made for Peak Auto. He's never looked back at the car stocks, like BMW (GM, Tata and Daimler). GM's recent plant closing in Oshawa was painful, but correct. The carmakers are facing ride-sharing. Technology disrupts and cars are old technology.
PAST TOP PICK
(A Top Pick Oct 17/18, Down 18%) It's been a really bad media year for FB. But step back. In a rising rate environment, you want a company with a good balance sheet. FB has $40 billion in cash and no debt; they earn $5 billion net income per quarter and $20 billion annually--in a class of maybe 20 companies in the world. They dominate social media. You're gonna have these tough years. It was up 50% last year and gave back a lot of that this year. Revenue growth is still 40%.
PAST TOP PICK
(A Top Pick Oct 17/18, Down 7%) Growth rate has risen from 30% to 50% a year, but this year it's faced its first tough season. Not doubt that trade tensions and sanctions have impacted their stock price, but the underlying value remains strong. He's happy to own this.
PAST TOP PICK
(A Top Pick Oct 17/18, Down 15%) This was a play on the European yield curve. Interest rates will rise in Europe and he'd get a 5% yield. What happened was the complete opposite way, because the ECB has been overly accomodative. ING earns nearly 1 billion euros per quarter, but the stock is declining becuse the yield curve isn't doing anything.
BUY
Likes this for how they've run the company. They have 5-7% revenue growth; 55% of net income comes out in the dividend. They hike the dividend every January/February--good. Demographics favour a robust US housing market. 40% of U.S. homes are 40+ years, which means they need work. One problem could be Amazon getting distribution for Kenmore (taking away sales from stores like HD).
COMMENT
A super safe company. He used to own it, but doesn't see upside in it now. There's little money made in hardware, but much more in software. Cisco is a hardware platform. But CSCO is very strong, but beware of lack of growth in the future.