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We think ARG is doing the right things. Debt was an issue in prior cycles, and it has cut/eliminated its dividend in the past. Now, it is in strong financial shape and very cheap at 8X earnings. It has been cash flow positive since 2015. It only has one (sponsored) analyst, but should grow EPS by 10%+ this year. Insiders own 13% and have been small buyers in the past six months. The stock is cheap, but so is the sector. New growth concerns have emerged. Still, the stock is up 15% YTD and 52% in a year. Its small size is still a risk, but for those looking beyond the current cycle it looks good, especially now that the balance sheet has been taken care of.
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CAT is $165B market cap, 17X earnings, 1.62% yield, 6.96% five year dividend growth, down 4% YTD, debt/cash flow about 3X, forward growth about 10%. DE is $135B, 25X earnings, 1.30% yield, 14.68% dividend growth, 5X debt/cash flow, forward growth 15%. We would consider both HOLDS today. While good companies, they will be vulnerable in a global economic decline, as both have been in prior cycles. Automation/AI will help margins, but this will take some time to show up in the numbers. Mining expansions (CAT) and weak spending (DE) will likely mean less-than-robust growth and/or weak sentiment for a period of time.
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The worst is likely over here, and we think a dividend cut would actually be well-received by investors at this point. We would regard it as a HOLD but could be accumulated (slowly) into any new weakness that develops.
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Utilities and energy companies well positioned for tariffs:
Utilities primarily serve consumers and businesses in the domestic market. The industry provides essential products and services that are recession-proof in nature. These companies’ facilities are mainly located in the local areas where they operate. Therefore, there is a low exposure to tariffs.
In addition, though some energy companies that have a decent business volume from the U.S. could be affected, there are other companies that generate revenue and own assets in Canada and, as a result, could be less affected.
Suncor Energy Inc. (SU, Market Cap: $63 billion): an oil-refining company with the majority of operating revenue and assets located in Canada.
Hydro One Limited (H, Market Cap: $28 billion): operates as an electricity transmission and distribution company focused in Ontario.
Capital Power Corporation (CPX, Market Cap: $6.9 billion): a developer and operator of renewable and thermal power generation facilities.
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Maybe we are not at the panic stage yet but the markets are retreating due to tariffs, AI questions, uncertain U.S. economic and foreign policy. Maybe we have hit a bottom but we can't tell. He is looking for new lows earlier in the day followed by buying back in later. Consumer spending which has been constant is shifting along with sentiment so there is concern going forward. He has been taking some of the volatility out of clients' portfolios through asset allocation while still protecting them against the cost of living increases, inflation and their need for money in the next few years. With the downdraft this is an opportunity for younger people to double up on the the market.
There's no shortage of cyber attacks and threats. That's why CRWD hit a high of $455 on Feb 19. Since then, shares have plunged to $308. He was selling, but today he bought back shares which are back to last summer's levels when they caused a massive worldwide outage. EPS guidance was light, but that reflected a higher tax rate ahead. Are already seeing a big return from AI, helping them catch hackers and reducing working hours by employees (labour savings). They beat earnings and revenues and delivered record cash flow. He bought more on today's weakness.