FOCUS: North American large cap stocks
MARKET OUTLOOK:
Investors continue to obsess about the timing of interest rate increases and how many times they will go up, and in how many months. As investors in companies, we find it rather silly to worry about when interest rates will be 2 per cent.
If that were to happen overnight (please just get it over with so we can hear the next ‘thing’), we do not think the businesses we own would miss a beat continuing to sell their amazing products and services to a raving crowd of fans.
Yes, yes, we know the common refrain: ‘rising interest rates are bad for growth stocks (whatever that means. Do you want to own no growth stocks?) - but think of it this way, for example - Google has net US$125 billion sloshing around in the bank. They can’t spend it fast enough. If it were to start earning 2 per cent on that cash balance, that would be about an incremental US$2.5 billion in profit. This is bad?! US$2.5 billion is a bit less than National Bank of Canada makes in a year employing about 21,000 people and doing a very good job of taking all kinds of risk to make that profit.
National Bank is worth $33 billion. Google just sits there and pays someone to roll over T-bills til they figure what to do. That cash has all kinds of option value (if the government doesn’t steal it) and people worry about rising interest rates?! Stay focused on good companies.
TOP PICKS:
Amazon (AMZN NASD)
Last bought today $3,280.00
Amazon is the worlds most sophisticated and highly integrated purveyor of solutions for anyone who wants something, be that having toothpaste delivered or the government wanting its data centers managed. It relentlessly pursues excellence, efficiencies and growth for its own enterprise or for others. Investors constantly worry about the short term while Amazon keeps its eye on the prize.
Citigroup (C NYSE)
Last bought at Dec 17 2021 at $59.50
Citigroup is the bank that investors love to hate. Its sprawling global enterprise has been an underperformer. New leadership is cleaning house. Presently, the company is being heavily discounted by investors. You can buy the company at 75 per cent of its TANGIBLE equity. The bank is just not that bad. With the dividend yield at 3.20 per cent, its income potential plus capital appreciation puts it well above its peers. Get paid to wait.
Disney (DIS NYSE)
Disney is the most dominant media and entertainment company in the world. Everyone is worried about how many new subscribers they will get this next year. Forget about that. You’ve heard about the Metaverse? Augmented reality and virtual reality? Dream like Disney and be prepared to be entertained richly. The best positioned company to entertain the world
PAST PICKS: September 23, 2020
JPMorgan Chase (JPM NYSE)
- Then: $92.74
- Now: $165.30
- Return: 78%
- Total Return: 84%
Facebook (FB NASD)
- Then: $249.02
- Now: $332.04
- Return: 33%
- Total Return: 33%
Bank of America (BAC NYSE)
- Then: $23.26
- Now: $48.28
- Return: 107%
- Total Return: 111%
Total Return Average: 76%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| JPM NYSE | Y | Y | Y |
| FB NASD | Y | Y | Y |
| BAC NYSE | Y | Y | Y |
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