Latest Stock Buy or Sell? Make More Informed Decisions!

He's been quite pleased and surprised that equities have held up as well as they have. We've had a few fairly hot inflation numbers, with CPI and retail sales and PPI. Equity markets are telling us that the economy is just fine with a little higher interest rates. This is the digestion process that the market has to go through. Low interest rates were the anomaly, not the norm, and all of us have to get used to more normalized rates that will approach 5% on an ongoing basis. It will favour good quality companies with an ability to manage the debt load, and maintain high profitability metrics such as ROIC and ROE, in higher interest rate environments. That plays right into what his firm does, so he's not unhappy.

He does think rates will stay elevated. There's a huge swath of investors and professionals who've never experienced rates in the mid-single digits. But some of them, like him, have. Markets, economies, and corporations can handle these levels. We last saw higher rates in the late 1990s, which were halcyon days for equity markets. Don't be fearful of them, but build them into your screens to look for companies with enough firepower to do well with interest rates that are a bit higher.

Kingpin of quality and investing. Interestingly, he also owns its top 3 holdings: AAPL, BAC, and CVX. Good quality companies with ability to sustain earnings over the long term. 30x earnings, not a great buy. Cherry-pick companies instead.

Lots of geopolitical turmoil, so it gets attention and trades at a 10% premium to the market. Usually trades 85-90% of market multiple. This makes him nervous. Defense spending is predictable, no catalyst there. In the space, he owns RTX.

1/3 of its business is in defense, but 2/3 is more of a commercial application. Gives defense exposure plus the boost because of a nascent aerospace cycle.

Initiated a dividend, and the chart shows that the market likes this. A very worthwhile hold.

Very few exceptions to not liking a dividend being initiated or raised. Company feels confident in its cashflow to pay a dividend, invest in R&D, or buy back shares. 

Classic value trap. Attractive dividend at 5%, but the fundamentals are failing. Class action lawsuits. Especially worrisome is PFAS, a toxic chemical, representing 3% of its business.

Covid turned everything on its head. Surgeries have been put off. Revenues, cashflow, and earnings have gone flat. We need the catalyst of more procedures and loosening of the hospital system, he doesn't know when this will happen. A fine company, but it's hard to predict when reality might change.

We're in a tight labour market, and this leads to higher wages because there are fewer workers than there are job positions. Even though the Fed is trying to slow the economy down, labour employment has been very sticky. That's probably the last nail in the coffin of inflation that the Fed will get to, but it's not proving easy. Since Covid, the whole employment picture has changed. You can have a tight labour market that's not inflationary, but only if productivity increases. So prices don't have to go up, because companies are producing more with less. It's doable, because technology will enable us to do more with less, and it has for the last number of decades. Productivity is the key, watch this carefully. If we can create a magic situation where workers get paid more, profit margins are maintained, and inflation is kept in the bottle, wouldn't that be a wonderful world? In some ways it's doable, but it's a big ask.

Exciting company. Growing rapidly. Pricing is for future growth. Was trading at 200x earnings, now at 100x. Good news is already in. Market's nervous because of C-suite turmoil. Stay on the sidelines.

Healthcare notoriously left out of most recent high-beta rally. Don't give up. Don't chase low-quality, high-beta companies just because they're going up for 6 weeks. Go with good quality companies, and you will be rewarded. He's sticking with it. Demographic tailwind, 6% FCF yield, expects $33 EPS in 2023 which is a 15x PE.