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COMMENT
There's shortage of worries: inflation, and the Delta variant which is already impacting China a little. He's not interested in travel and other reopening stocks, because they're priced to perfection. That's why they are showing weakness with the emergence of Delta. But energy infrastructure, health, utilities and financials are attractive, are defensive and can pass the test of time. So, no airlines or movie theatres. Covid may transition so that'll we'll handle it with annual vaccinations. Likely, the ripples will be felt for a long time, just like the 2008 crash was felt for years.
BUY ON WEAKNESS
It's one of Abbott's biggest competitors. It's in an attractive industry, medical equipment, where companies earn good returns. But BSX's valuation is high, gotten ahead of itself (like the whole sector), so wait for a pullback. BSX had a strong quarter as non-elective surgeries have bounced back, but its PE is rich.
biotechnology
pharmaceutical
DON'T BUY
A big disruptor. They had an efficient cost structure before going public but endures. The service itself is great for consumers, but the stock fundamentals are not there now. Another worry is competition with Expedia and other players entering this space. Then, there are legislative pressures that may arise.
Technology
HOLD
If you already own this, you're very well positioned. The banks forward PE is 11x is fine. They can't raise dividends or buyback shares until regulators allow them, which is likely to happen. US banks pay far lower dividends, but buyback more shares, but it's the reverse with Canadian banks. Expect returns for TD in the future: 4% on the dividend, 1-2% on buybacks + topline growth.
banks
COMMENT
They report tomorrow It's in a challenging sector. Who has the best chips? The best next-generation ones? He prefers Taiwan Semiconductor, given lower risk. That said, NVDA is top of the class in this space. He expects strong earnings tomorrow; demand has never been stronger for their chips. His only complaint is NVDA's high 44x forward PE. Taiwan is around 24x forward PE.
computer software
processing
BUY ON WEAKNESS
He's long followed this and used to own it, not now because of oil prices. There are so many incentives to raise oil production which will likely moderate prices. SU is vertically integrated, so it's more durable than peers, and it has a massive, strong balance sheet. They position themselves as a dividend play. It could be a counter-cyclical acquirer which could add company value. Energy stocks have rebounded sharply this year, too.
integrated oils
WAIT
H&R plans to sell a major property He follows it. It's a diversified REIT so are valued very lowly in today's market. It trades at 9x FFO. HR has taken steps to fix their problems, so shareholders must be patient. The underlying value is there. Don't rush to sell it after this tough time, and collect the good dividend. He like Artis REIT with its active management making the fundamental, long-term moves.
property mngmnt
investment
BUY ON WEAKNESS
If CP buys KSU or not CP and CN are wonderful businesses, near monopolies. His hunch is regulators won't allow either CN or CP to buy KSU, though the rails are certain. A 50/50 chance the deal will happen. If so, either CP or CN will do well with KSU, making the deal accretive. He doesn't see much risk in the deal. They've done a great job fixing their cost structure, but both rails trade at a rich more-than-20x forward PE.
Transportation
PAST TOP PICK
(A Top Pick Aug 21/20, Up 11%) It's underperformed peers because of the threat of higher interest rates impacted utilities. It's more utility than green energy, but it's a lovely mix. AQN is very well-run and boasts one of the strongest growth profiles in the industry. The valuation is attractive.
electrical utilities
PAST TOP PICK
(A Top Pick Aug 21/20, Up 34%) It's been a tough year for them, given Covid. It's well-run and demographics favour it. However, their occupancy fell from 90% to 78-80% due to the pandemic. But occupancy is rebounding and they have a robust development pipeline. Pays a great yield and has sound fundamentals. Still a buy.
property mngmnt
investment
BUY ON WEAKNESS
A wonderful software company. They focus on buying smaller companies. They are disciplined and buy a lot of companies and integrate them well. They compound capital very well over time. Loves it. The only caveat is its high valuation. They tend to have lumpy quarters, disappoint shareholders, so that is the moment to swoop in and buy. Because it has bought so many companies, it doesn't offer a dominant software, so it's not vulnerable if something happens to a particular software.
computer software
processing
BUY ON WEAKNESS
A wonderful company, but has seen some share price weakness, due to more competition over an acquisition they want to make. Their positioned in the auto parts space is excellent. Their fundamentals boasts revenue growth, strong margins and free cash flow, and share buybacks and dividend hikes. They're positioning well for e-cars. The economy will remain hot, but Magna is very economically sensitive (i.e. fears of a recession), so it can be volatile. So, buy on a lower price to weather that volatility.
Automotive
PARTIAL BUY
