Today, The Weekly Buzzing Stocks by Billy Kawasaki and The Panic-Proof Portfolio (Stockchase Research) commented about whether HOG-N, BB-T, CNQ-T, BTO-T, SOFI-Q, UP-N, CVNA-N are stocks to buy or sell.
The story maybe has played out in terms of YOY increases, but the squeezing of the economy has not yet played out. Consumer wages haven't kept up with price increases. Wages have recently ticked up, but on a 3-year basis they're well behind increases in food, energy, and broad CPI. Now increased interest costs are also squeezing the consumer, and we're only 6 months into that cycle. As that plays out across a full year, plus the view that durable goods were stocked up during the pandemic, the earnings story in 2023 gets worse and so does the economy. The market's saying we're going to get both a soft landing and a decline in interest rates at the end of the year, and he doesn't think you can have both. We might actually get neither, and the market is not properly discounting that.
Currently up to about 15% of a portfolio. The big difference from last year is the rate we're getting on cash balances, nearly 4%. At that rate, you can afford to be patient for a few quarters. When rates were low, there was more impetus to get that money invested. Notwithstanding the very strong market action over the past week or so, we may yet see a significant buying opportunity open up. Remember that last year, too, markets looked very positive in the first few months.
Significant capital expenditures. Announced a further 3-year plan, and that will stress the EPS and cashflow numbers. Once the build is complete, capex should decline and earnings should grow. Dividend increases should, perhaps, be slowed. In 3-4 years, the payout ratio should normalize. In the meantime, it's vulnerable to something going wrong, payout ratio and credit rating getting stressed, dividend getting cut. He doesn't see that happening, growth is predictable and not as subject to inflationary pressures. Still expensive at these levels, try for mid-low $50s.
Two completely different sectors. First questions are what's already in your portfolio and at what weighting? Similar dividend yields and similarly disappointing to investors in 2022. BNS has had poor performance for quite some time, and now a leadership change. TRP has a good, strong management team, but cost overruns. At these levels, he prefers TRP -- underlying business doing quite well, core fundamentals extremely strong, project issues will get solved though investors may have to wait a bit.