COMMENT
Profits are what matters. Exactly. There's always something happening in the world: the Fed, Afghanistan, the Delta variant. Ultimately, if a business increases its earnings and cashflow, it's going to be worth more. If you distill it to that level, eliminates the noise that can throw you off track. Buy good companies that have a better advantage against their own history, their peer group, and the market in general, and you'll do well over time.
COMMENT
Is the rebound artificial? In March 2020, he wrote about the 3 types of recession: event-driven, cyclical, or structural. The pandemic was event-driven. It was deep and sharp, and we came out of it quickly. In the end, make sure you're paying a fair price for what you're getting. If you compare to the end of 2019, the market is up about 30%, and corporate profits are up about 22%. Modest multiple expansion, but not wild. Now in 2021, we have more of the telltale signs of an early cycle environment than in 2019. Companies are restocking, inventory expansion, consumer never in better shape, rate of saving is high, corporate profits are booming, corporate margins are the highest ever at just over 13%, low interest rates. A lot of good things happening. A correction can happen any time, but long-term investors are in a good spot here.
DON'T BUY
Focus is on retail and pharmacy. Good side of the business, but slow growing. He's gone with CVS. More vertically integrated, growing dynamically. CVS has health insurance with Aetna, pharmacy benefit manager with CareMark, and HealthHub offering in-store diagnostics.
BUY
Vertically integrated, growing dynamically. CVS has health insurance with Aetna, pharmacy benefit manager with CareMark, and HealthHub offering in-store diagnostics. Better choice than WBA.
BUY
Entry-level homebuilder. The industry has lots of moving parts and negative news. Don't let this sway you. We're still in the nascent part of the cycle. There's a home supply problem. EPS could touch $4 in the next two years.
DON'T BUY
Likes what they've done. Stock's been volatile. On valuation, it's found its level. Usually trades at a discount to the market. Growth metrics aren't fantastic at 5% a year based on cashflow and earnings. Not terrible, but nothing to write home about. Better opportunities out there. See one of his Top Picks today.
BUY
A well-positioned investment in the deep commodity space. A cyclical investment, as well as a secular change. Produces copper, 70% is used in electrification such as alternative sources of energy or cars. Strong case for long-term increase in demand for copper. Excellent investment here.
BUY
GM vs. F In the end, it's how well a product line is accepted and profits. GM has much higher margins on products than Ford. Everyone knows the F-150, but in total truck sales, GM sells more. Electrification will be very profitable for GM. Chip shortage, extended warranty costs, and supply chain issues are providing a good stock entry point. Ford is a great company and well-positioned. In a peer group analysis, you want #1 in the industry.
DON'T BUY
F vs. GM In the end, it's how well a product line is accepted and profits. GM has much higher margins on products than Ford. Everyone knows the F-150, but in total truck sales, GM sells more. Electrification will be very profitable for GM. Chip shortage, extended warranty costs, and supply chain issues are providing a good stock entry point. Ford is a great company and well-positioned, but in a peer group analysis, you want #1 in the industry.
BUY
Well priced company to participate in the 5G rollout. Patent business is robust.
COMMENT
Dollar cost averaging. Dollar cost averaging is fine, but always be aware what percentage a stock is in your portfolio. Always set high and low constraints on a stock's percentage of your holdings. Keep a properly diversified portfolio.
DON'T BUY
Part of the fintech revolution. Very expensive at 8-10x revenue, done very well, good execution. He prefers companies with a lower risk profile.
COMMENT
Stocks with high valuations. Sometimes expensive things get more expensive, and you never find a good entry point. That's OK for him. He's made peace with the fact that he's not going to participate in every winner. There's lots of choice out there. The sleep at night aspect, and security of his clients, is important to him. He'd rather miss a good opportunity that has a risky profile than make some money by luck. He prefers companies with a lower risk profile, and his returns still compete extremely well with his peer group.
PAST TOP PICK
(A Top Pick Aug 27/20, Up 40%) Trades at just over 14x earnings. Managed Covid expenses quite well. Excellent value here.
PAST TOP PICK
(A Top Pick Aug 27/20, Up 67%) He'd buy it again with both hands. They'll make over $100 EPS this year. Making a ton of money on YouTube. Advertising business continues to expand. Lots of other projects yielding great ideas that will be big money makers. Trading in the high 20s, growing at 20-25% a year. Tremendous value. Don't be thrown by the high price tag.