COMMENT
This week has been quite crazy. He has come at it from a quantitative perspective where he wants to buy stocks that are cheap, stable and rising. This week, we saw rotation into anything that was in a downtrend. More levered companies in financial and energy saw rotation. This was due to the vaccine news.
COMMENT
Coronavirus vaccine. Looking to Q1 and Q2 of next year, it is positive. However, the market is trying to pull-forward this timeline. This bull market has been very odd, since normal beneficiaries coming out of a recession, such as financials, materials and industrials have not recovered yet. It has been an asset price recovery and not an economic recovery. The market is very expensive. There are expensive growth stocks and reasonably priced cyclical stocks.
COMMENT
The broader index is dominated by big tech right now. Looking into next year, we could see the index stay relatively flat, but could see good returns from financials, materials and industrials. Parts of the market will probably be up but not necessarily the absolute market.
SHORT
They have a small short on it. Has decent price momentum but the valuation is still a challenge. Return on equity is negative at -12%, with a stressed balance sheet. Interest coverage looks poor. One that he would avoid.
COMMENT

The challenge with tech is that there are a couple different groups within the sector. There are very expensive beneficiaries of the pandemic, such as ZOOM, which are challenges. They do not have traditional valuation metrics. Other groups exist, like FANG and Microsoft. It is not the best value opportunity however.

BUY
It has a strong price trend, and the valuation is still reasonable. The return on equity is very high quality at 42%. It does not look cheap on the PE basis with 33x or 34x earnings, but it has a great balance sheet, pays a yield with a low payout ratio, and they are buying back stocks. A cashflow machine.
BUY ON WEAKNESS
Likes it and holds it. It's been 3 months since he started a position. He would not sell it, and it scores in the top 10% on valuation metrics. High return at 23%, with 12x earnings. Balance sheet is fine and pays a good yield of 4.5% at reasonable payout ratio. It should do well in the recovery.
DON'T BUY
Has a small short on it. It is defensive but it is not cheap for the cashflow it generates. The earnings are 14x EBITA and 1.7x book with 24x price to earning. The yield is healthy at 4.5% but the payout ratio is rising.
COMMENT

Would prefer TOU over VET. The challenge is the stressed balance sheet for these energy providers. VET has some of the worst price momentum, value, volatility and earnings profile in terms of current return on equity. They can move quickly if they look like they will survive. If you are looking for a huge amount of leverage and upside for a recovery, you could own VET but TOU is the more stable choice.

COMMENT

Would prefer TOU over VET. The challenge is the stressed balance sheet for these energy providers. VET has some of the worst price momentum, value, volatility and earnings profile in terms of current return on equity. They can move quickly if they look like they will survive. If you are looking for a huge amount of leverage and upside for a recovery, you could own VET but TOU is the more stable choice.

BUY
Likes it. They have had a good move recently. It fits into the industrial and material bucket. There is a stealth rally going on which is forecasting an improved economy. These companies have done quite well during the pandemic. Valuation is good, return on equity is positive, and the balance sheet is good. Could still buy it here for the cyclical recovery.
DON'T BUY
It is part of the beaten down energy related stocks. Debt is a problem, it is expensive on a EBITA bases and price momentum has been poor. It is not quite cheap enough. It has not come off the bottom. It could be subject to tax loss selling. It is too dangerous to short, but it is also not own-able.
BUY
One of the only sectors they do not trade because of the difficulty to model for them. In a world where central banks are stimulating like crazy, it is understandable to want gold. Currency devaluation is a real risk. It scores well under their metrics. A value stock. High return on equity, at 24%, 14x earnings and good balance sheet. Their resource life is shorter than others but they have made acquisitions.
HOLD
It is the middle of the pack. The price momentum has held him back. Valuation is decent at 5x EBITA and 8x PE. The 5.5% yield is healthy with a reasonable payout ratio of 65%. Needs a little more positive fund flow before taking a position.
SHORT
One of those stressed companies in terms of earnings quality. They have shorted it. The short positions have had a shock to the system on Monday with a rush to cover cyclical recovery. Price momentum is mediocre and valuation is not there. They have negative return on equity and no real yield. Still in the penalty box.