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COMMENT
Investors pricing in an end to the Fed tightening cycle. A bit premature. Nice rally off June lethargic lows, with growth stocks leading the recovery in the NASDAQ. Long bond yields have come down from the May peak, USD rolled over a bit, and gold dipped and then rallied. Cyclical stocks have lagged, which indicates to investors that the Fed is nearing the end of tightening. He hesitates to jump on that bandwagon here. Risk going forward. Fed must get inflation under control. Another 100 bps of tightening to go. Long way to go from 8% back down to 2%. Can't tell if we've seen the peak of inflation, though it seems we have. When Powell soothed nerves a couple of weeks ago, the market may have rallied too much.
COMMENT
Sentiment indicators. He's neutral weight in stocks right now. BAC survey had the lowest confidence on record, high levels of cash. Largest gross short position ever. Lots of money is out of the market expecting a pullback. This gives him comfort that some of the bad news is in. Auto stocks, for example, have already priced in the next recession. We're not going to have a dramatic turndown, but they have to cool down economic growth. Don't rush out of stocks, as they've already taken a hit this year. He still hesitates to say we've hit bottom and we're starting a new bull market.
BUY
A compounder for grandkids? It still fits that legacy view. See his Top Picks. Numbers were good last week. Cloud services alone justify the valuation. Diversified investments. Massive cash balance, positive free cashflow, dominant in distribution. Comfortable owning at these levels.
specialty stores
HOLD
No problem with the price. He's not rushing to buy the banks, he's underweight. Risk to earnings growth, mainly because slowing economy and capital markets will increase loan loss provisions. Dividends are still safe. Risk of large US acquisition, bought closer to the peak. Last week's sale of Schwab and purchase of Cowen made sense. He favours BNS and CM in Canada.
banks
COMMENT
US vs. Canadian banks. He's not rushing to buy the Canadian banks, he's underweight. There's not a lot of short-term recovery, as tailwinds of the last 2 years are going to disappear. Risk to earnings growth, mainly because slowing economy and capital markets will increase loan loss provisions. Dividends are still safe. He favours BNS and CM in Canada. He's leaning more toward the US banks like C, JPM, and non-bank financials like AXP.
WEAK BUY
CCO vs. NXE He'd lean towards CCO, go-to name, largest producer in the world. The large players attract more international interest. NXE is a small cap, it may not get as much interest, and so the valuation may not get as high. CCO valuation is a bit extended. Outlook for uranium is positive. He'd look at the Sprott U.UN, which is a direct play on uranium prices, rather than the producers.
integrated mines
DON'T BUY
NXE vs. CCO He'd lean towards CCO, go-to name, largest producer in the world. The large players attract more international interest. NXE is a small cap, it may not get as much interest, and so the valuation may not get as high. CCO valuation is a bit extended. Outlook for uranium is positive. He'd look at the Sprott U.UN, which is a direct play on uranium prices, rather than the producers.
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