John Stephenson, president and CEO of Stephenson & Company
Focus: North American large caps and resource stocks
The election of Donald Trump is a game changer, dramatically lifting the importance of security selection, depressing the importance of basket approaches (ETFs) and benefitting cyclical sectors of the market. Financials, industrials, energy and materials companies should be favoured going forward while utilities, REITs, gold, telcos and consumer staples should be avoided.
BUY: CITIGROUP INC. (C.N) – Bought on November 16, 2016 at $54.50
- Citigroup will be a huge beneficiary of the backup in yields that we’ve seen recently.
- The firm is part way through a multiyear turnaround with very experienced management.
- The bank is very well capitalized with a Tier 1 equity ratio of 12.6 per cent.
BUY: FACEBOOK INC. (FB.O) - Bought on November 16, 2016 at $116.20
- Facebook has an extremely large user base with more than 1.7 billion active users.
- The company remains very unlevered with the opportunity to monetize video advertising.
- Facebook has extremely high margins with EBITDA margins in the low-60s per cent range.
SHORT: GAP INC. (GPS.N) – Shorted on November 23, 2016 at $27.40
- Lacks a competitive advantage.
- They are in a highly promotional apparel space, compounded by shifts to e-commerce which will make it hard for the company to show earnings growth.
- Has moved very significantly in the last quarter and appears over-valued.
PAST PICKS: DECEMBER 16, 2015
VISA INC. (V.N)
- Then: $79.86
- Now: $79.08
- Return: -0.97%
- TR: -0.22%
ADOBE SYSTEMS INCORPORATED (ADBE.O)
- Then: $95.56
- Now: $104.50
- Return: +9.35%
- TR: +9.35%
DELTA AIR LINES (DAL.N)
- Then: $52.12
- Now: $48.49
- Return: -6.96%
- TR: -5.42%
TOTAL RETURN AVERAGE: +1.23%