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BNN Bloomberg Market Call Tonight – August 2 2019 – Top Picks

BNN Market Call Investment Videos

BNN Bloomburg Two people at table

MARKET OUTLOOK

While some market analysts make the statement that the majority of this quarter’s earnings are positive, we disagree. We believe the S&P 500 Index is not trading at 19.21 times earnings but more like 21.79 times earnings, a 14-per-cent difference or overstatement.

We believe companies are using smoke and mirrors to fudge their earnings in three ways:

  1. They’ve talked down expectations so they don’t have as much ground to make up.
  2. They’re buying back shares in record amounts to ensure they show earnings “growth.” For example, Bank of America earnings were up 8 per cent in the last quarter, but if not for the share buybacks, there would have been little to no profit growth.
  3. Companies have reduced their capital expenditures, which has reduced their costs and pumped up earnings. Unfortunately, by not investing in capex, these firms are sacrificing the future for the present.

Our S&P Index ranges remain 3,700 on the high side and 2,200 on the downside. In the event of a “melt up” rally of 20 per cent, market valuations would be similar to the 1929 and 2000 peaks. If the S&P drops from 3,700 to 2,200, the difference would be 40 per cent on the downside. This is not a good risk/reward ratio to have. If you take $1 and go up 20 per cent and then drop 40 per cent, you’ll be left with 72 cents, not the original $1. And similar to 2008, it may take four to five years to get back to break-even. That could put retirements in jeopardy or those preparing to retire as nest eggs would be much lower and why we believe it’s important to hold some cash in the portfolio, be diversified globally and avoid correlation risk and concentration risk.

 

CHUBB (CB.N 0.57%)
Last purchased on July 23, 2019 at $145.98.

Chubb is a global property and casualty insurance company with subsidiaries in 55 nations. The best metrics to study for the insurance industry is book value growth and combined ratios. Year-to-date, net tangible book value is up 12 per cent, while the combined ratio is 89 per cent (89 cents of costs versus $1 of premiums written). Their entire investment portfolio of US$107 billion is made up of investment-grade bonds and cash, so if interest rates continue to fall, the value of the investment portfolio should grow.

BROOKFIELD ASSET MANAGEMENT (BAMa.TO 0.53%)
Last purchased on July 23, 2019 at $63.36.

Brookfield invests in real estate, power-generation assets and infrastructure holdings. An investment in Brookfield is to take advantage of long-duration assets that should provide sustainable returns while management fee income from its private equity pools enhances overall total returns. It’s also a quasi-hedge. If economic growth collapses, Brookfield, compared to other publicly-listed corporations, should be sheltered from an earnings collapse.

TREASURY INFLATION-PROTECTED BONDS (TII 2.125% due Feb. 15, 2040)
Last purchased on July 24th, 2019 at $128.95

The Treasury inflation-protected bonds are another way to hedge against falling interest rates. Long-dated bonds have the greatest price sensitivity and rise the most in price when interest rates drop. An investor receives the 2.125 per cent coupon every year plus the inflation rate (currently 1.65 per cent) for a total coupon of 3.775 per cent. Add in the price return of 10.3 per cent and the total return year-to-date is 14.08 per cent in U.S. dollars. If the U.S. government continues to raise budgets and increase its deficit spending while wages continue to move higher, inflation could rise.

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
CB           Y           Y           Y
BAMa           Y           Y           Y
TII 2.125%           Y           Y           Y

 

Video Transcription

 

Anita Sharma: All right, time now for David Driscoll’s top picks, and this is a past pick that rewarded you quite handsomely—CHUBB.

David Driscoll: The other thing is, if interest rates continue to fall, CHUBB does ha-only owns government bonds and cash in your investment portfolio.

AS: Uh-huh.

DD: So if rates go lower, then CHUBB’s going to make more money off these bonds.

AS: Uh-huh.

DD: Again, they’re not having-they’re able to raise prices for the first time in like three or four years, so there is, um—the ability to grow earnings over the next little while. But all three top picks are more like “batten down the hatches and deal with what’s happening in the current.” So, if interest rates are falling, then CHUBB will benefit from it.

AS: Okay, let’s get to BAM. You’re picking one of the uh Brookfield’s here.

DD: Yup. Because private equity is illiquid, and BAM makes money off private equity and charges fees for all the funds they have. So if you have a 5 to 7% long-term 20-, 30-, 40-year time horizon for those kinds of returns and the markets start to crap out, BAM shouldn’t be hurt as badly.

AS: Technical term. (Laughs)

DD: Yes. So, again, it’s just a matter of battening down the hatches and being able to protect yourself against any kind of market fallout. Li-uh- you know, the public markets can get hurt. BAM shouldn’t be hurt as badly.

AS: All right, and you also have a bond.

DD: I am throwing a bond at you.

AS: In-play here.

DD: Yup, inflation-protected bond.

AS: Yup.

DD: Two things; if Trump wants to run deficits and increasing budgets and wages rose uh, recently, because usually what drives inflation is-are wages. So, two things happen. If interest rates are falling, because it’s a long-dated bond, they tend to have the greatest price volatility, so they’re going to move up faster. They’re up about 10% year-to-date, this particular bond, because it’s a two and an eighth, plus the 1.7 inflation, plus the price movement. And this is not correlated to the stock market, so you’re getting a non-correlated asset, um, that can hold steady depending on whatever we get moving forward.

AS: Shout out to my Twitter buddy, Mark Tyler. He’s a former Merrill Lynch guy. He lives in uh Mexico now. He keeps Tweeting me, I think maybe every other day, “You need to buy the 30-year treasury in the U.S. Buy it. Hold it. Wait for the dust to settle.” Your thoughts?

DD: Yup, same thing, it’s almost the same thing because-

AS: Yeah.

DD: It is the U.S. Treasury, it just happens to have that inflation protection behind it as well. So, you’re getting more than the two and an eighth coupon, you’re getting price plus the inflation rate on top of it. And, I have no problem with that because, again, it’s a great diversifier. I don’t know of anyone that’s ever come on this show who was a guest who’s ever talked about inflation-protected bonds. And for our clients who have fixed income, 5% of their portfolio is in Canadian and U.S. inflation-protected bonds.

AS: How concerned are you, David, as we head into some more volatility now?

DD: See the bags under my eyes?

AS: Yeah. (laughs)

DD: Yeah, I’m very concerned, because I think we’re getting closer and closer. Sure, we could have a melt-up and a rally, for whatever reason, but when I look at the earnings and start to strip away and looking between the lines, I don’t see quality of earnings is going to push this market higher.

AS: All right, so bit of a shakedown, uh sooner rather than later?

DD: That’s why we’re holding cash, yeah.

AS: Do you want to make uh- Do you want to make a prediction when we could see uh-

DD: I never make predictions.

AS: Yeah.

DD: Because when you look at predictions, seven out of eight people are wrong. That often-

AS: Okay. We’ll just batten down the hatches like you said, get prepared, and position yourself accordingly.

DD: Yup.

AS: All right. David, always a pleasure to see you, sir.

DD: Hopefully, 20 more years.

AS: Oh yes. Twenty more years here on BNN Bloomberg. Okay, you have a great long weekend, sir.

DD: Thank you. You too, Anita.

AS: As always, folks, thank you, please consult a qualified financial advisor before you make any investment decisions. It’s a long weekend, have a great one! On behalf of our producer Aaron Sobeski, take it easy. We’ll see you Tuesday.

BNN Bloomberg Market Call Tonight – July 29 2019 – Past Picks

BNN Market Call Investment Videos, , ,

BNN Bloomburg Brett Girard

MARKET OUTLOOK

While the VIX remains just off 2019 lows, investors must remain vigilant and focus on portfolio management. The average retirement account holds three asset classes: equities, fixed income and cash. On the equity side, we recommend a portfolio of 30 stocks diversified by geography, industry and size of company. For fixed income, a laddered corporate bond portfolio and inflation linked bonds are critical. Lastly, we recommend holding cash in varying percentages to dampen the volatility of the market. An investor’s asset class allocations and the constituents within each asset class should be reflective of their time horizon and risk profile.

Taking this approach means investors can have comfort knowing their portfolio does not need to be adjusted for every news headline. For example, the bond market is pricing in a 0.25 or 0.5 per cent cut in interest rates by the Federal Reserve on Wednesday. Whether the cut happens, the magnitude of the cut is larger or smaller than expected and/or the language around the cut is dovish or hawkish, if an investor’s portfolio reflects their time horizon and risk profile, it’s unlikely any changes are required.

It would behoove investors to focus on the bigger picture. If your time horizon is longer than a decade, be in equities and be patient. The S&P 500 hit new highs 219 times this decade and can continue doing so over the long term.

PAST PICKS

BROOKFIELD ASSET MANAGEMENT (BAMa.TO)

  • Then: $63.56
  • Now: $65.07
  • Return: 2%
  • Total return: 3%

HEICO CORP (HEI.N)

  • Then: $104.11
  • Now: $137.63
  • Return: 32%
  • Total return: 32%

HDFC BANK (HDB.N)

  • Then: $122.72
  • Now: $115
  • Return: -6%
  • Total return: -6%

Return average: 10%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
BAMa           Y           Y           Y
HEI           Y           Y           Y
HDB           Y           Y           Y

 

Video Transcription

 

Anita Sharma: Alright, we are with Brett Girard. It is time now for his past picks. Brookfield Asset Management, BAM, maturing 3% since May 27th of this year.

Brett Girard: So, let’s start and just zoom out.

AS: Sure.

BG: This has only been two months.

AS: Exactly. Of course.

BG: And whether it’s up or down, any of these stocks, it doesn’t really matter because it’s only two months. We- we look at holding periods of 10 to 20 years, so this is just a small fraction of that.

AS: We’ll throw up a 10 year in a bit.

BG: Yeah, and the 10 year doesn’t really matter. It’s just for investors out there, if you’re looking two months, even three months, performance, open the aperture and think about the longer term. Because every time you sell it, you’re going to have to pay taxes. So, find good companies and hold onto them for the long-term.

AS: Uh-huh.

BG: On Brookfield, this is- I mean, if you look at the 10-year.

AS: Yeah.

BG: This is a fantastic company.

AS: It’s a beautiful chart.

BG: (Laughs) It’s a beautiful chart. They made the Oak Tree acquisition, ah earlier in the year, so now they’re managing about 500 billion in capital. They’re generating fees off of that capital, and as they sell assets within, they get carried. As an investor, you participate alongside management of Brookfield. So, it’s a really nice way to play infrastructure, real estate, and private equity, that most people can’t access in their portfolio.

AS: Or, if they have in other areas, they’ve been met with scandal and so on and so forth.

BG: Yes, that’s right, yeah. And it’s a Canadian name, so you’re not too worried about the effects because you can buy in Canadian dollars. Because they’re 500 billion of capital, they’re one of, if not the largest asset manager, depending on how you look at it in the world, they have scale. So, scale allows them to write big checks. They can take down a 5 billion dollar, 10 billion dollar asset, that most people it would be the size of their fund or even larger. So that gives them an advantage there, they have resources around the world, they literally invest in almost every developed country, and many developing countries right now. And over the long term, I think that the different types of assets that they have and the ways that they can creatively find these different assets are really interesting. So you know, just three assets that they own—they bought General Growth’s shopping malls in the U.S. at a distressed price because arguably retail’s coming off a cliff. I have a good feeling that Brookfield will figure out how to deal with that. They have pipelines in Colombia, and they have nuclear infrastructure—they actually bought G.E.’s nuclear business Westinghouse, I think last year, or two years ago.

AS: Uh huh.

BG: So for the long-term, fantastic company to hold.

AS: Alright, in the short-term, or maybe a long-term play as well, HEICO Corp. Now this is your play on Boeing, right?

BG: That’s right. Yeah. So, HEICO makes airplane replacement products. They’re a certified dealer of these things.

AS: You happy with this return?

BG: Again it doesn’t-

AS: I know.

BG: Yeah.

AS: But you’ve got to enjoy-

BG: You know what, I’ll take it.

AS: Yeah.

BG: But it doesn’t really matter. Again, we’ve got to look over 10 years and see what the 10 year chart looks like. Uh, it actually happened that it popped the day after I was on, so it just, just read my mi-

AS: (Laughs) Hey, you’re honest. We’ll take that, we’ll take that.

BG: Yeah, yeah. So, so with HEICO what you’re getting is exposure to all of these planes that are coming back into the fleet. So the Max 8’s been out, and now all these planes are coming back in, because there are still routes that need to get flown. So this over the long-term has been a very strong company. They also have an electronic technologies group that doesn’t deal with replacement parts, it actually deals with space. So, as the Jeff Bezoses and the Elon Musks of the world think about space travel, they’re going to end up using HEICO products in their whatever spacecraft or aircraft tend to look like-

AS: Don’t forget Raul or was it Richard-

BG: And, Richard Branson, of course. Yeah with chimef.

AS: Isn’t he the one who’s first? Seems like he’s first to plate there.

BG: Yeah, right, yes. Those-

AS: But you never know, it’s a tight race. It’s interesting.

BG: They’ll all need HEICO at some point.

AS: (Laughs) There you go. All right, let’s round this out with HDFC Bank, it trades in New York.

BG: Yup, so this is-

AS: Now this one you made, okay you’re in the water a little bit, by about 6%, do you own this? Still?

BG: Yes. Yup. Yeah for sure, again-

AS: This is a long-term play? Yup.

BG: Ten to 20 years, right? So what we’re looking here is at the growth in India. The overnight rate in India has come down, but it’s still above 6%, relative to 2 and change where it is in Canada and the U.S. It’s the- India is the second most populated nation in the world. They’re only about 70 million people behind China. And they’re expected to eclipse China, I think it’s in the next two to three years. So, what’s happening is there’s a lot of people moving from the countryside into the city. As people move from the more rural agrarian lifestyle into this sort of urban or suburban lifestyle-

AS: Especially where the tech centers are located. Right? Yeah.

BG: Exactly. Nearby Delhi. They need to get banked. So, they need to go to a bank, there’s going to be deposits there, again, over the long-term, this is a great company, this is something that people should really think about. You know, instead of adding your fifth bank into your portfolio, your fifth Canadian bank, get something international. HDFC is a great way to go on that.

AS: That’s an interesting play because I—and I don’t know the stats offhand— but with respect to India, there’s still like a significant portion of people, and I guess a lot of them are rural-based so that makes sense, that don’t even have access to a bank right now. And I think under a second mandate Prime Minister Narendra Modi, that’s what he’s really trying to change. He’s trying to eradicate the black money situation and really get some more uh, transparency if you will, and get folks who are hiding their money under their mattresses to get to a bank.

BG: Right. And who stands to benefit from that? You know, HDFC is the second largest bank behind ICICI, so they’re you know, front and center with the political agenda there.

AS: All right, so you get a banking play, and you get an emerging markets play. Kind of a two-fer as we say, maybe even a three-fer. All right, Brett, thank you so much for that, we’re going to take a break here on Market Call Tonight. We’re going to be coming back with Brett Girard and your phone calls. 1 (855) 326-6266.

At the end of the video, there is a final slide at reads: DISCLAIMER. Market Call Tonight is intended to provide viewers with information about stock markets and financial activity. BNN Bloomberg recommends you consult a professional financial advisor before making personal investments of any kind. Derivatives trading involves a high risk of loss and is not suitable for most investors. Past performance is not a guarantee of results.

BNN Market Call Tonight – May 27th, 2019 – Market Outlook & Top Picks

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BNN Bloomburg Global Equities

MARKET OUTLOOK

Is the market expensive? If you believe the numbers, the S&P 500 is trading at a forward earnings multiple of 17.2 versus a historical average of 15. When you adjust for the fact that share buybacks are averaging about 2 per cent of float, the S&P is overvalued by about 17 per cent.

So, what should you do? That depends entirely on your time horizon and risk profile. If you have a short-term liability (buying a car or house), a substantial drawdown of your portfolio is required: play it safe and be in cash or highly-liquid short-term fixed income investments. But if you expect to own your portfolio for five years or longer, you can’t afford to be out of the market. Interest rates are expected to stay low, which is why the stock market has rallied for the better part of 10 years.

How do you proceed in the latter scenario? The prime focus should be on asset allocation. Equity selection comes down to companies that can consistently grow free cash flow and reward their shareholders with a growing dividend. For any new Liberty clients, we’re purchasing only half positions to start and then wait for opportunities. This provides upside participation, but also downside protection.

For fixed income, corporate bonds should be laddered over a 10- to 15-year time horizon to benefit from rising or falling interest. Finally, cash should be a strategic allocation as its correlation with the stock market is almost zero. Our clients currently hold 20 per cent times their equity allocation. If their asset mix is 60 per cent equities, they have 48 per cent invested in stocks and hold 12 per cent cash.

TOP PICKS

BROOKFIELD ASSET MANAGEMENT (BAMa.TO 0.20%)

Following the acquisition of Oaktree Capital, this company is now the second-largest global asset manager by assets under management (AUM) after Blackstone. This is an opportunity to participate alongside some of the investment field’s brightest minds with access to asset classes like infrastructure, renewables, private equity and real estate that are out of reach for the average retail investor. They continue to exhibit long-term strategic thinking with the recent acquisition of the battery division of Johnson Controls (renamed Clarios) which supplies roughly one-third of the world’s car batteries. Layer on the counter-cyclicality of distressed debt powerhouse Oaktree Capital and you have a great long-term hold.

HEICO CORP (HEI.N)

Heico is a family-operated serial acquirer in aerospace and defense. Since the current father-and-sons management team took over in the early 1990s and acquired over 70 companies, compound annual sales and net income have grown at 16 and 19 per cent respectively. Their Flight Support Group (which sells certified airline replacement parts) should do well as many shelved planes have been brought back into the fleet as a result of the Boeing Max 8 grounding. Meantime, their Electronic Technologies Group continues to develop and purchase highly specialized offerings catering to the defence, satellite and space sectors.

HDFC BANK (HDB.N)

Indian Prime Minister Narendra Modi recently won the national election and will be in power for another five years. India operates under a democratic model so change may take longer relative to China, but should occur nonetheless. The country’s 6-per-cent GDP growth rate is double the U.S.’s. For HDFC, revenue, deposits and loans continue to grow 15 to 20 per cent. Layer in a steeper yield curve and the secular trend of a population becoming more urbanized and wealthy and HDFC becomes an attractive, long-term opportunity.

 

BNN Market Call Tonight – March 21 2019 – Market Outlook & Top Picks

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Liberty IIM, Top Pick of Bloomberg

MARKET OUTLOOK

Corporations currently have a problem: They have massive amounts of debt to repay after acquisitions, limiting the amount of money they can allocate to share buybacks and dividend increases. These buybacks have been the reason the stock market has risen as much as it has. According to data from Goldman Sachs, net purchases from companies totaled $1.6 trillion during the past three years while investors from pensions to mutual funds to individuals were sellers.

At $17.6 billion, corporate buybacks so far in 2019 are 18 times as much as the total buying from hedge funds, the only other client group that’s bullish on stocks. Charlie McElligott at Nomura cautioned investors to watch out for a market decline after the S&P 500’s 20 per cent rally from its December low. The next month is “the window for the U.S. equities pullback as supply/demand would shift,” McElligott wrote in a note. Other catalysts include quarter-end selling due to pension fund rebalancing and a pickup in Federal Reserve balance sheet runoff in the final two weeks of this month, he said.

Finally, of the companies listed in the S&P, the average dividend increase in 2018 was 11 per cent. This year, it’s been averaging 7 per cent, the historical norm but significantly lower than a year ago when companies began to pay lower corporate taxes.

For investors, it’s important to pay attention to portfolio structure through proper diversification by avoiding correlation risk in equity holdings, concentration risk of any one stock and holding enough cash to take advantage of any market corrections that may come our way.

TOP PICKS

CANTEL MEDICAL CORP (CMD.N)
Last purchased on March 20, 2019 at $67.02.

Cantel is a healthcare company that provides infection prevention (water sterilization for hospitals and dental clinics), control products and diagnostic and therapeutic medical equipment. Its diverse offerings include medical device reprocessing systems and disinfectants for dialyzers and endoscopes, water purification equipment, masks and bibs used in dental offices and therapeutic filtration systems.

The stock reached a high of $130.92, but currently trades at half that value thanks to a slowdown in the dental and life sciences businesses. However, organic revenue growth was 5.3 per cent last year and free cash flow is expected to double, which should provide a pickup in profitability. The company also installed a new CEO to help turn around its weaker businesses. Dividend growth is in the mid-teens and the payout ratio is just 8 per cent, so lots of room to grow the dividend.

ENGHOUSE SYSTEMS (ENGH.TO 1.01%)
Last purchased on March 21, 2019 at $31.99.

Develops software products for automated mapping, call centres, transportation solutions, facilities management and geographic information systems. It’s a Canadian company with lots of international exposure. It currently trades near its 52-week low because revenues in the last quarter rose only 1 per cent. That’s because they didn’t make any acquisitions, which to us is a positive sign that management won’t overpay for future deals. The dividend has steadily grown in the mid-teens and the payout ratio is only 8.5 percent.

EXPONENT (EXPO.O 0.35%)
Last purchased on March 20, 2019 at $57.27.

Exponent operates as a science and engineering consulting firm. The company performs scientific research, analysis and evaluations to solve complicated issues facing a range of industries and governments. A risky business is a potential customer for Exponent.

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
CMD           Y           Y           Y
ENGH           Y           Y           Y
EXPO           Y           Y           Y

BNN Market Call Tonight – February 15 2019 – Market Outlook & Top Picks

BNN Market Call Investment Videos

MARKET OUTLOOK:

It appears we’re in full “risk-on” mode as investors have forgotten the reasons behind the massive sell-off in the fourth quarter of 2018 and the fact that global economic growth is slowing, as are corporate earnings. The race to S&P 3,700 is well underway – only 1,000 more points to go and we’ll be back at historical tops last seen in 2000 and 1929.

According to Andrew Slimmon, managing director at Morgan Stanley Investment Management, “The market is pricing in a down Q1 (a drop in corporate earnings) but they’re pricing in a positive Q2 and Q3,” said. “The risk is that Q2 slips to zero growth and now you’re talking about two consecutive quarter of negative earnings growth, which is technically an earnings recession. The reason why the market has not focused on this yet is there was such an overwhelmingly high level of bearishness at the beginning of the year,” Slimmon said. We couldn’t agree more. For all equity portfolios, we’re 80 per cent invested and still holding 20% in cash until we see some form of market capitulation.

TOP PICKS:

CN RAIL (CNR CN) $111.41 operates a network of track in Canada and the United States, transporting forest products, grain, coal, sulfur, fertilizers intermodal and automotive products. It operates a network of about 20,000 route miles of track connecting the Atlantic and Pacific oceans and the Gulf of Mexico. We have owned the stock since 1997 and have captured a dividend that has grown an average of 16%. With the North American economy crippled by logistics issues (a dearth of transport trucks because of a lack of drivers or pipeline issues in the oil and gas industry), more freight is being shipped by rail. The increase in revenues essentially falls directly to net income which should help buoy the stock price. Last purchase was on February 13, 2019 at $108.31 CAD.

IPSEN SA (IPN FP) $124.45 Euros is a pharmaceutical firm whose drugs target oncology, endocrinology and neuromuscular disorders. The oncology business now represents over two-thirds of sales. Somatuline (for advanced carcinoids) leads the way, with Cabometyx (renal cell cancer) and Onivyde (metastatic pancreatic cancer) picking up more revenues. The company has $1 billion euros in cash-on-hand, its debt-to-EBITDA (earnings before interest, tax, depreciation and amortization) is only 2 times, leaving it with plenty of room to make acquisitions. R&D expense is average, around 13% of revenues. Last purchase was on February 13, 2019 at 109.95 euros.

THERMO FISHER SCIENTIFIC (TMO US) $249.91 offers analytical instruments, laboratory equipment, software, services, consumables, reagents, chemicals and supplies to the pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions and government agencies. It is a serial acquirer as its recent purchase of Patheon was made to offer its clients beginning (research) to end (manufacturing) opportunities. Of the top 15 innovations in 2018 that were recognized by the readers of Analytical Scientist Magazine, five of them came from TMO. Their strong free cash flows allowed them to reduce debt by $2 billion and reduce leverage from 4 times to 3 times. The dividend was also raised by 13%. Last purchase was February 12, 2019 at $247.32 USD.

BNN Market Call Tonight – January 17th 2019 – Market Outlook & Top Picks

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market call tonight screenshot
 

MARKET OUTLOOK

In the fourth quarter of 2018, the market gave a wakeup call for investors. Stocks were overvalued and at an earnings peak, leaving investors to lick their wounds when their stocks got pounded. The lesson is that it didn’t need to happen if they took the appropriate steps to diversify their portfolios and hold some cash. Our all-equity clients, who were with us for the entire year, made 4 to 8 per cent depending on their circumstances.

Meantime, because we saw this as a correction and not investor capitulation, we believe that nothing has changed. For the market to continue higher, earnings growth is going to have to be as strong in 2019 as last year. Unfortunately, we don’t see that happening. When second-quarter earnings are announced by July, the benefit of U.S. tax cuts will disappear and company growth will be dependent on global GDP growth, which is already in decline. As a result, an earnings slowdown could keep the markets under wrap for 2019. More is explained in our upcoming newsletter, available on our website.

We continue to hold 20 per cent cash times the equity weight in portfolios and have no desire to sell our securities, as the average dividend growth rate is around 14 per cent.

TOP PICKS

DANAHER (DHR.N 1.27%)
Last purchase was Jan. 7, 2019 at $101.46.

Danaher is a conglomerate of companies in the medical sciences, water management, dental and industrial technologies segments. Its businesses offer solid growth and the company has a penchant for finding reasonable acquisitions to grow their business both organically and through M&A activity. Expected revenue growth is 5 per cent organic to 2020, the dividend has been rising between 10 and 15 per cent a year and its debt-to-cash flow is two times, leaving it with plenty of room to make acquisitions. It currently trades around 15 times 2021 expected earnings.

NV5 GLOBAL (NVEE.O)
Last purchase was Jan. 7, 2019 at $64.36.

It provides professional and technical engineering and consulting services. The company offers planning, design, consulting, inspection, field supervision and management oversight, servicing the construction, real estate and environmental industries. The stock dropped from a $96.70 high in November and currently trades at an expected 12 times earnings for 2021. It doesn’t pay a dividend and is part of our U.S.-only and small-cap portfolios.

TELEPERFORMANCE SA (TLPFY.PK)
Last purchase was Jan. 8 at €143.20.

This company operates call centres, conducts programs to attract new customers, offers customer services and technical support services, collects debts, offers market research services, conducts telemarketing and develops CRM software. We like Teleperformance as it has embraced the future of call centres using artificial intelligence. This improves services and reduces costs as companies worldwide (like the banks and telecoms) work to cut expenses. The company is scaling up, allowing it to generate better free cash flows. This has helped support a significant boost to its dividend payout (1.85 euros in 2018, up from 1.30 euros in 2017). It currently trades at 15 times 2021 earnings.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
DHR Y Y Y
NVEE Y Y Y
TLPFY Y Y Y