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COMMENT
Market Outlook He likes that the government has stepped in during a time of crisis, but not it is time for transparency. Are taxes going up, will we see cuts in some programs? He thinks taxes will increase as it appears unavoidable at this point. Although Canada is a better financial situation than most countries and interest rates are low to service debt, higher taxes are about the only way to go. The recent market rally is discounting a good outcome of the March 23 lows. Twenty-five percent of the market cap is in five companies. He is shocked at how wide the breadth has been on the recovery. He thinks value is now coming in. He is using a barbell approach -- buying the big 5 and value stocks.
DON'T BUY
He would be very cautious on GE. The company has been an investment grade company for decades. Today it is a speculative company. You are not buying the GE of old. It is 70% debt to total capital and as a pension deficit of $95 million. Cash flow is unpredictable. They are now starting to sell of their good quality assets. This will reduce future cash flow.
electrical
electronic
HOLD
Citi target of $400? AAPL is a component of their holdings and has been so for 15 years. For years, it was under appreciated. For the past year the multiple has moved to a premium. He thinks this is in anticipation of 5G -- a ground breaking new technology requiring new hardware and software. They are in a prime position to take advantage.
electrical
electronic
BUY
It pays a nice dividend and the company is committed to it. The company is hitting its stride. It made a big acquisition that introduced a new business enterprise, focusing on botox. They have the most successful drug in America -- Humara. This is helping to reduce their dependency on revenue from Humara. He recommends it here. Yield 5%
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COMMENT
Physical gold? People like gold as a hedge to their core holdings. It has worked reasonably well in the latest days. When he buys gold for client as a small holding of their asset mix, he would buy through an ETF. The thought of holding physical gold brings on the thought of Armageddon. You may not be able to deal with gold under that scenario -- you sure can't eat it! When it comes to owning gold producers, the correlation with gold prices is not great. A lot of those companies are not good at running their operations.
DON'T BUY
An Act in the US back in the early 1980's introduced the end of patents with drugs. Patent expiration opened the door for generics. MRK has become the most successful pharma company and has a big patent coming due soon. He would tend to move towards the bio-pharma space instead.
biotechnology
pharmaceutical
DON'T BUY
The company has multiple issues, not the least of which is COVID and how people may change their plans to fly. This overshadows the 737Max issues from before. They have a lot to overcome before they can be a decent multiple for future cash flow. It is more speculative now and he would probably pass now.
Transportation
COMMENT
He has chosen to exit their holding about a year ago, based on their UK alliance (due to Brexit). He participates in the space with CVS instead, who bought a pharmacy benefits company. CVS has more than 10,000 locations in the US. The company has become vertically integrated, which gives them a long runway. Their "Health Hub" offers medical practitioners to people who would not otherwise have access to one.
specialty stores
