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COMMENT
Value shares in the TSX 60 have underperformed which points to the future. 32 stocks in the TSX 60 here have dividends higher than 2%, and total returns of these value stocks are -12.8% YTD a while the overall TSX 60 is -0.2%. There's a big division: growth stocks are up 12% while value are down 12%. We saw this in the tech bubble of the late-1990s; after tech collapsed, value names picked up the slack for the rest of 2000s decade. Alert: investing in tech stocks are fine, but remember that the Nasdaq in 2000-3 fell 71%. Even Microsoft fell 75% in 1999 and didn't recover until Feb. 2016--17 years. Watch companies with high PEs and high Betas. Don't just chase tech stocks, but look at healthcare and staples that are performing just as well. Diversify. Gold: He prefers owning inflation-protected bonds than gold which offer similar performance if interest rates continue to fall. Gold has climbed this year because the USD has fallen.
WAIT
They make OEM for commercial airlines, and electronic components for airlines, the military and NASA. Half the business is doing okay while the other is cocooning. They hit a high a year ago, and has come down after a stock split. The smallcap manufacturers are under the gun in recent years from weakening demand and profitability will be tough looking ahead. He's waiting for a vaccine and an economic pickup before buying more smallcaps, including this.
David DriscollOwned
transportation equip & components
WAIT
Has long owned this. It's benefited from COVID, because DHR prrovides testing equipment. Their latest acquisition was huge, from GE's bio-farm unit. DHR is expensive now, but this is good for the long term. Buy only half or a third now and see what happens with volatility in the fall running up the U.S. election.
David DriscollOwned
machinery
COMMENT
Generally, the Canadian banks will get loan loss provisions. This quarter won't be as bad as the last, but the next one will be telling when all the car- and mortgage-loan forgiveness comes off the books, when we find out if people can afford homes or not. The banks are issuing more debt that pay 4.5% still have issues with car loans and mortgages.
banks
PARTIAL BUY
They're the leader in hips, knees and robotic surgeries. They were hit by COVID because elective surgeries stopped, but those have resumed now. Their revenue growth is 4-5 times higher than peers at 6-7% while peers like Johnson and Johnson were 1-2%. Dividends keep paying. Today is okay to enter this stock, though it's trading at 30x earnings. You can buy a half position now and see what happens.
David DriscollOwned
biotechnologypharmaceutical
COMMENT
Why is it lagging its Canadian tech peers? They're a little different from Shopify, etc. because they provide AI and cybersecurity to clients. It's up only 2% YTD. The market must be patient with their acquisitions to be accretive, and OTEX is a serial buyer. It drives him crazy that they issue bonds. But growing revenues are possible and they keep increasing their dividend. He owns this plus Shopify and Enghouse.
David DriscollOwned
computer softwareprocessing
DON'T BUY
The telecoms in Canada are sluggish now, because they have a lot of capex which limits their EPS. Telus is different because of its Healthnet service that they will roll out. Rogers is into sports. The dividends are roughly the same in this group, but where is the growth going to come from in this sector? Again, they'll be spending heavily for the 5G roll-out. He avoids this space.
telephone utilities
PAST TOP PICK
(A Top Pick Aug 02/19, Down 16%) Insurance is facing catastrophe because of COVID, though governments will not let the insurers go bankrupt. Insurers will probably cope by raising prices. Chubb has the highest credit rating and its combined ratio is 100%, despite the economic downturn. Chubb's book value continues to grow, though the stock is down 19% YTD. He'd buy on weakness. The 2.5% dividend pays you to wait.
David DriscollOwned
insurance
PAST TOP PICK
(A Top Pick Aug 02/19, Up 5%) It's a favoured holding because Brookfield has its hands in many business. It's his way to invest in alternative strategies, namely private equity without paying the extra costs. BAM is getting hit on the property REIT side, but doing well in renewables and infrastructure. Also, they derive dividends from subsidiaries and they charge fees for all the hedge funds they run. Their Oak Tree purchase was another notch in its belt, because Oak Tree buys distressed debt at very low prices, as they did during the March plunge. They keep increasing their dividend by 10% annually (while globally dividend payouts have dropped 23%), which indicates strong free cash flow. BAM is probably sniffing around for more bargain buys.
David DriscollOwned
managementdiversified
COMMENT
PAST PICK - 22% total return since August 2, 2019 Treasury inflation-protected bonds: if you own bonds, you're exposed to inflation which we haven't seen much of in the past decade, but if it comes, these bonds give you some protection. Example: in the 1970s, inflation peaked at 18%, this bond paid over 2% + the inflation rate (over 20% total return). This bond always puts you ahead of the curve. The only problem with these bonds now is that the real yield is negative. Wait until the real yield turns positive. Because they're long-dated bonds, these have run up so much lately in price.
David DriscollOwned
SELL
A pest control company that's doing well during COVID. He sold this two months ago because it's trading at 75x PE (higher than Amazon's) yet it doesn't grow its earnings much, and there's infighting among the Rollins brothers who are the majority shareholders.
DON'T BUY
BUY ON WEAKNESS
They make specialty ingredients and vitamin B12, needed for babies' growth and to fatten livestock. Their last quarter showed surprisingly growth in 5 of 6 divisions and profits rising. Its PE is high at 36x, so step in during a pullback. Dividend growth is 10% in the past 5 years, so cash flow is strong. They haven't relied on their oil and gas business, which is good, but other divisions.
David DriscollOwned
INDUSTRIAL PRODUCTS
BUY
If The Democrats Their goal is to sell outside the U.S. which they have done successfully, which have increased revenues, profits and dividends. Most importantly, their pill will replace people with type 2 diabetes from injecting insulin and helps people lose weight. They are the biggest insulin-maker in the world. This will be a big mover in coming years in pharma. You can take profits if the stock has moved up and is outsized in your portfolio.
David DriscollOwned
biotechnologypharmaceutical
PARTIAL BUY
Very well-run, going gangbusters because video technology has taken off during COVID. It trades at nearly 50x PE, so careful adding to this. Then again, you can buy a half position now and wait. They make small acquisitions enhances the company's offerings. Price is high now. This depends on how long COVID lasts and people continue to use videoconferencing.
computer softwareprocessing
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