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TOP PICK
Grand daddy of the banking sector. One of the best banks in the world. The capital market sector is on fire and this will carry them. Net interest margins are weak but there are future opportunities. With an expanding economy, loan books will grow and higher interest will help their net interest margins. The reserves they took are being released since there were less credit losses. (Analysts’ price target is $167.86)
Financial Services
PAST TOP PICK
(A Top Pick Sep 30/20, Up 29%) Their primary franchise is going of patent in a couple years. They have been working on diluting its effect, especially with their purchase of Allergan. Other franchises are getting to billion dollar franchises too. The clock is ticking. FDA detemined they have to put a warning of possible heart problems, which led to a sell off. This indicates that the markets are getting nervous. Cheap, good dividend, but always have to be alert to the future.
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COMMENT
Market outlook. There was a survey that showed a rapidly growing bearishness among individual investors. This gives some confidence that if there is a correction, it will be relatively short and sharp. Seeing a script we thought we might. With the delta variant pushing hospitals and us mentally, this could be the last wave before we can recover for good.
DON'T BUY
A very good company that is classified as recession proof and highly predictable. Yields on their collection business is firming and prices of recycling is good. Trades at 30x earnings. Traditionally a 5-6% grower. Unless they pick up more contracts, they will continue to grow according to economic growth. Valuation is too high here.
environmental
WATCH
A stable company that processes payroll for 750,000 companies around the US. A stable business that will grow along with the economy. Trading at a pricy 35x earnings. Predictability is very high but they look at growth against own history and other competition. There may be an opportunity in the future to enter.
computer software
processing
COMMENT
Likes Apple. Apple is slightly less expensive on valuation than Microsoft. Their franchise is second to none. They came out with the iPhone 13, which was not particularly flashy, but the expected sales is positive. There are aging iPhones and the replacement cycle will be enormous. They have a good formula for success. Multiple has moved up in part to the recognition of the formula's ability to repeat itself.
electrical
electronic
COMMENT
Likes Apple. Apple is slightly less expensive on valuation than Microsoft. Their franchise is second to none. They came out with the iPhone 13, which was not particularly flashy, but the expected sales is positive. There are aging iPhones and the replacement cycle will be enormous. They have a good formula for success. Multiple has moved up in part to the recognition of the formula's ability to repeat itself.
computer software
processing
BUY
The material sectors tend to be highly volatile. Seeing commodity prices firm up. Taking advantage of it. Their corporate policy is to pay out a percentage of earnings and their earnings have been very good. Declared an attractive dividend, but you cannot bank on this dividend going forward. Certainly doing well, strong balance sheet.
other mines
A company they are excited about. The largest copper miner in the world. Now at 100% production capacity in their Indonesian mine. Copper prices have been firm, and at this level of copper prices, they produce $15B EBITDA. Enterprise value is under $60B. Extremely attractive. Every 10 cent change in copper price, they make $400M of cashflow. The application of copper is exciting. There is cyclical and secular elements that will push copper demand. (Analysts’ price target is $42.59)