Full episode: Market Call for Thursday, July 23, 2020
Gordon Reid, president and CEO at Goodreid Investment Counsel
Focus: U.S. equities
Big-cap stocks mostly related to technology are masking a less dramatic move in market indexes. Cap-weighted indexes (bigger companies have a greater weighting in the index) have entered or are near record territory, but the average stock remains roughly 10 per cemt below record levels. That squares more accurately with our current situation, with the economy on its heels, a contentious election looming and valuations at elevated levels.
Visa sold Sep. 2019, Waste Management sold Nov. 2019, Walmart sold Nov. 2019, Halliburton sold Feb. 2020, United Airlines sold March, 2020, Booking Holdings sold March 2020, Walt Disney sold April 2020, McDonald’s sold April 2020.
Emcor (EME NYSE) Latest purchase Nov 2019 at $89
Emcor is a facilities service company performing mechanical, electrical and construction functions. Positives include a strong balance sheet, a growing backlog, domestic focus (95 per cent of revenue is from U.S.) and a growing need for large domestic infrastructure projects. At 13 times 2020 expected earnings and projecting a 2021 10 per cent free cash flow yield, Emcor represents good value.
Morgan Stanley (MS NYSE) Latest purchase June 2020 at $47
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 jewel in their crown was the closing of the E-Trade acquisition. They are insulated from loan losses that other financials are exposed to, yet benefit from the spirited trading environment we find ourselves in.
Sherwin Williams (SHW NYSE) Latest purchase June 2020 at $564
Sherwin Williams has become a part of the “stay-at-home” trade. With more time on their hands and fewer places to spend their money, many homeowners are sprucing up their houses. Household formations are expected to resume their upward trend once COVID-19 has moved on. All in all this is an issue for the times.
PAST PICKS: JUNE 26, 2019
Chubb (CB NYSE)
- Then: $147.00
- Now: $134.88
- Return: -8%
- Total return: -6%
Walt Disney (DIS NYSE) – SOLD APRIL 2020
- Then: $140.40
- Now: $118.68
- Return: -15%
- Total return: -14%
Walmart (WMT NYSE) – SOLD NOVEMBER 2019
- Then: $110.16
- Now: $132.39
- Return: 20%
- Total return: 22%
Total return average: 1%