Full episode: Market Call for Wednesday, December 16, 2020
Gordon Reid, president and CEO of Goodreid Investment Counsel
Focus: U.S. equities
Key for investors are the high likelihood of things returning to business as usual by mid-2021 and a Federal Reserve that has the market’s back. That will allow for continued valuation expansion. Important though is the rotation from high multiple growth stocks into less pricey value offerings, most notably cyclical issues that will benefit from a world economic recovery and a dose of inflation. Passive investing will fade: Be a stock picker.
General Motors (GM NYSE)
Latest purchase December 2020 at $45.
The reinvention of General Motors has yet to be fully appreciated by the market. Consider these facts; their product is getting positive recognition, it has shrunk its cost base to allow B/E at 10 million N/A vehicles sales (normal run rate 17 million), they will spend $27 billion on electric vehicles by 2025 and 40 per cent of offerings will be electric, a global synchronized recovery is lining up and they are growing FCF at a rapid rate (2021 FCF yield of over 15 per cent).
Morgan Stanley (MS NYSE)
Latest purchase December 2020 at $65.
Morgan Stanley has successfully transitioned from an emphasis on institutionally focused fixed income business to wealth management platforms (51 per cent of revenues). The latest jewels in their crown were the closing of the E-Trade acquisition ($13 billion) and the deal to acquire Eaton Vance for $7 billion. They are insulated from loan losses that other financials are exposed to, yet benefit from the spirited trading environment we find ourselves in.
TRI Pointe Group (TPH NYSE)
Latest purchase October 2020 at $19.
Homebuilders have been on a tear and for good reason. A confluence of factors has led to strong performance measurements, including historically low mortgage rates, constrained supply of homes and strong demand from people wanting to move from cities because of the pandemic. At eight times this year’s earnings, TRI Pointe continues to represent excellent value.
PAST PICKS: DECEMBER 20, 2019
Alphabet (GOOGL NASD)
- Then: $1,351.22
- Now: $1,753.20
- Return: 30%
- Total Return: 30%
Masonite International (DOOR NYSE)
- Then: $71.39
- Now: $97.43
- Return: 36%
- Total Return: 36%
Sherwin-Williams (SHW NYSE)
- Then: $580.98
- Now: $724.73
- Return: 25%
- Total Return: 26%
Total Return Average: 31%