HOLD
Earnings have been doing fine. He likes them as they sit in a great place for tech and telecom infrastructure spending. From here, he would hold, but would love to see it break above $35 resistance to add more. However, he is not convinced the market is going up forever, so watch your position closely and trade with a stop -- maybe $32.
COMMENT
US Banking Sector People are watching interest rate futures for a signal of US Fed actions. It is so early in the year and only 5 weeks after the Fed loosened their language. He still sees the Fed keeping liquidity constrained. The US bank sector credit position is pristine right now. The problem is that the banks are not preforming well, relatively speaking. He wonders where the future growth will come from. He would look elsewhere.
COMMENT
US Banking Sector People are watching interest rate futures for a signal of US Fed actions. It is so early in the year and only 5 weeks after the Fed loosened their language. He still sees the Fed keeping liquidity constrained. The US bank sector credit position is pristine right now. The problem is that the banks are not preforming well, relatively speaking. He wonders where the future growth will come from. He would look elsewhere.
COMMENT
A great company, but he would prefer to take a basket approach. High-quality and good capital deployment. He likes the medical equipment space. He would prefer to hold the ETF IHI-N instead.
TOP PICK
He likes the end-market growth story -- knees, hips, joints, etc. High-quality with a high market beta -- this is not a defensive ETF. A broad basket with a diversified portfolio. Yield 0.36%
TOP PICK
Not without its volatility. Some leaked documents on pension reform causing it to move today. Good support and he likes the technical confirmation. Yield 2.5%
TOP PICK
A defensive holding, with more pro-cycle play. A good yield for the space. Yield 3.4%
COMMENT
He called the current rally in December. Markets spend lilttle time in fair value, like a pendulum swinging between oversold and overbought. Stick to a disciplined strategy throughout. No question we've had a strong start to 2019, but there will be a give-back at some point. Perhaps, we'll see a positive surprise in the economic backdrop as earnings have been constructive so far. 2018 was great for earnings growth, up 25% YOY. He expects around 5% earnings growth this year. Be invested for the long-term now. The cost of doing nothing--due to loss aversion--is very high. Don't be afraid to sell.
DON'T BUY
A great business model driven by memberships which mostly makes up their $3 billion net profit. A very good company. But it trades at 27x earnings, which has always puzzled him--why so high? This makes COST risky. So, any misstep can be costly.
BUY
Visa vs. Mastercard He loves this sector. Both are fine companies. They don't take credit risk (the associated banks do). Instead, they do payment transactions, and here Visa (1.9 trillion) dwarfs its competitors combined. Visa also has a bigger debit card business and are more international oriented than Mastercard; Visa has now absorbed Visa Europe, which used to be a different company. Europeans use cash more than credit, so there's great opportunity here.
COMMENT
Visa vs. Mastercard He loves this sector. Both are fine companies. They don't take credit risk (the associated banks do). Instead, they do payment transactions, and here Visa (1.9 trillion) dwarfs its competitors combined. Visa also has a bigger debit card business and are more international oriented than Mastercard; Visa has now absorbed Visa Europe, which used to be a different company. Europeans use cash more than credit, so there's great opportunity here.
BUY
There are many, many unmonetized opportunities within Google. They just reported 23% growth of revenues, trading at 20x earnings. The market was concerned about operating margins falling short because of R&D. To him, this is not a negative, because GOOGL spends huge amounts on R&D that will pay off in the future. Look at YouTube, which took time to become a moneymaking machine for Google. Don't be impatient.
DON'T BUY
It's no a phone company anymore. They bought Direct TV to get into the media business, which demands a lot of investment. ATT isn't the best competitor in this space.
COMMENT
It's been frustrating. It should be valued much higher, trading at a single-digit multiple with more business coming in and a long runway. They do large-scale construction like airports and bridges. The opportunity may lie in the US Congress which may pass an infrastructure bill--infrastructure which is failing and needs an upgrade.
BUY
They're positioning themselves in vertical integration to succeed. They just closed the Aetna (insurer) purchase. CVS has 10,000 locations in the U.S. can capitalizing in healthcare by creating a clinic system within CVS locations to address non-emergency medical chronic issues (i.e. testing blood pressure). Most medical issues are not emergencies but they cost emergency rooms heavily. CVS helps address this problem.