A Comment -- General Comments From an Expert (A Commentary)

Ideas in the financials sector. Really likes US financials and financials in general. Some of the selloff is due to profit taking, what's happening in the markets, and the 10-year bond yield coming off a bit. Over time, interest rates will move higher, and this is good for banks. JPM is extremely well managed. For cheaper valuations, look at WFC, Citi, or Citizens Financial. European names like UBS and Credit Suisse. PRU in the US is another one he owns. Valuations are low based on history.

Financial stocks vs. ETFs. Lots of great ETFs, especially in the financial space. See his Top Picks today. XLF is a good one, as it's one of the largest financial ETFs in the US.

Benefits of ETFs. A basket includes pharma, devices, and technology. It depends on the size of the portfolio and your objectives. If you're trying to minimize risk and volatility, an ETF may be the route to go for all or part of your healthcare exposure.

EV sector. With interest rates moving higher, it's hard for him to recommend EV companies, as they're at extended levels. Look how TSLA has come down. Be careful about the high valuation names. Names like GM, Ford and Honda have outperformed TSLA year to date. The value names are a better bet right now.

Buying opportunities in tech and renewables. During the pandemic, these two sectors performed exceptionally well. Now there are momentum strategies at work. Big rotation this year from the reopening stocks into value stocks, though he doesn't consider commodities as value stocks because they're so cyclical. Some of that is overdone, some of the cyclicals are ahead of themselves. Renewables have come down significantly, so it's a great time to get into companies like BLX or INE. On the tech side, some of the e-commerce stocks have come way down, though their businesses are booming and will for many years.

EV stocks and SPACs in bubble territory. Bubbles always deflate. Monetary conditions have been so slack, one of the unintended consequences is speculative buying. Pure greed at play. Bitcoin has come way down, as there is no fundamental value backing that asset, and the greater fool theory is at work. Fed will be tightening over the next few years, and the speculatives are the first to go.

Canadian and US banks. Had the usual rebound after a crisis. Well ahead of themselves. Higher than before the pandemic, which doesn't make a lot of sense. Growth is extremely limited. Good stocks to hold long-term just to collect the dividend. All the good news is baked in, and they should trend sideways. Better opportunities elsewhere for upside as well as the dividend.

Approach to IPOs. Looks at a lot of them, and occasionally participates. It's the question of valuation that matters most at the end of the day. You can't dance at every party. Most valuations are much too rich, so he shies away from them.

Adage that insiders may sell for a number of reasons, but they only make significant purchases for one, which is that they think shares are undervalued. It's a big indicator for him. Also, when a conversion price on convertible debentures is lowered and a shareholder takes advantage of that, it's as though they acquired those shares. When an insider has a lot of skin in the game, they want it to work.

When not to look at PE. The E stands for earnings after taxes, depreciation, amortization, interest and lease payments, finance costs, etc. So in a capital intensive business, such as CJT, these items are significant and will depress the E. More appropriate would probably be to look at enterprise value to EBITDA.

Each day we get extraordinary news, and yet it's greeted as bad news--fear. Why? We've forgotten what a rapidly expanding economy is like. Today, it was the Wall St. Journal touting home prices hitting a record high in May, which reads like a criticism of Jay Powell's stand on keeping interest rates low, like a harbinger of bad times. This housing news is actually positive and healthy. Toll Brothers CEO feels this housing boom has legs and is actually starting to recover to satiate pent-up demand. Lennar's CEO is also bullish on housing. 2021 is not 2006, the eve of the Recession, caused by the housing meltdown.

Will the run-up in commodity prices continue this year? They've been weaker recently as the US Fed hints at raising interest rates to end of 2022/2023 and as China sells some strategic reserves. Oil prices are expected to stay high as world demand outpaces supply as we recover. In the U.S., inventories for products remain low, caused by supply chain bottlenecks and will continue this year. Inflation will be transitory, he feels. The pandemic has accelerated the digitization of the economy, which will keep wage inflation in check temporarily. Employers are competing with generous unemployment benefits in the U.S. Europe paid less, so people there want to get back to work. Also, the pandemic has encouraged people to work from home, which has enlarged the labour pool. Strong EPS revisions will continue for this (17% on S&P) and next year (14%) while the S&P is up only 6%. Markets will remain volatile for the next quarter or so as the supply chain sorts out. Consumer spending will be strong. Question about work is how much of a home/office mix it will be.

Outlook on the U.S. banks The US banks are outperforming the S&P this year. For instance, BAC is up 36% YTD and Wells Fargo 51%. We're in the late innings for the US banks recovering. These banks will likely be able to buyback shares and raise dividends again. Also, interest rates are expected to rise sometime in the future and therefore benefit the banks. He feels inflation is temporary.

Commodities volatility. Copper and lumber has seen some volatility in the past few weeks. Feds walked back on comments made last week that may not have been interpreted correctly by investors. The focus on Fed and reducing accommodation will be there for the next 6-12 months. The markets are trying to correct.