Best of BNN Bloomberg Top Stock Picks of June 16th, 2023

[Music] topic number one alphabet yeah so alphabet obviously the parent company of Google is the internet giant of the world with over 250 billion dollars U.S in expected revenues for 2023 Undisputed Behemoth and search and digital advertising alongside that Android is the world's most widely used smartphone operating system with over 70 market share YouTube is growing very quickly and of course the cloud increasing demand for Cloud Computing Services helping alphabets Cloud division as well Hardware is doing well whether it be Chromebooks or the pixel smartphone or smart home devices they've really built quite the ecosystem of products to be able to enhance their revenue and margins going forward and illustrate of how Global they are 50 of their revenue comes from International markets valuation perspective among the major Tech Giants alphabet is one of the more attractive the valued names in that space trading at only 1.3 times PEG ratio PE is a growth and the shares have really been meaningfully outperforming the broader S P 500 Index since late 2022 lows so we continue to hold this name adding to it we'd like this name oh okay your next idea asml holding remind us what they do so they are a semiconductor equipment manufacturer they're they were founded in 1984 Dutch company uh headquartered in the Netherlands they are basically in The Cutting Edge semiconductor equipment business specializing you know the fog lithography systems in the manufacturing of chips they offer chip makers comprehensive Hardware software and services to enhance chip production get those more information on smaller chips every single year they're looking to follow Moore's Law which is basically double the amount of information on the chip every single year so um AI 5G cloud computing is are areas that are driving demand for semiconductors and really this is kind of buying the picks and shovels of the semiconductor business you're buying the equipment manufacturers such as asml or Applied Materials or Cal Lane 10 core and so forth they do Supply some of the major semiconductor manufacturers Intel Samsung and Taiwan semiconductor are its major customers so certainly they've got lots of Revenue coming from those areas ninety percent of the revenues is driven from the fast-moving fast-growing Asian market and looking ahead I I see continuous robust Revenue expansion earnings growth and strong return on invested Capital valuation again this also trades at 1.3 times estimated p uh Peg or PE to growth which is cheap amongst the large Tech names out there your final idea is Starbucks yeah I highlighted this last time I was on Market call I continue to like it it's down to the 200-day moving average which I think is a compelling technical purchase at this point they've got 36 000 stores around 84 countries so clearly recognize uh well recognized around the world as a quick restaurant brand Revenue about 36 billion dollars this fiscal year um earnings their earnings report was strong uh they had good revenue and earnings they exceeded analysts expectations they guided a little bit softer so I think that's why the shares are down plus the uh covet Resurgence in China has probably hurt Starbucks stock but I think that's a bit of an opportunity at this point when you look at stocks you look at the U.S they now have over 30 million members active members in its digital loyalty program in the United States and China is very key they have 6 000 stores today they want to grow to nine thousand stores by 2025 so that's a thousand stores a year they're really aiming to leverage on China's urbanization and growing middle class uh population they have outperformed the S P 500 since spring of last year pays a 2.2 percent dividend yield I just think that with the technical sort of chart right now being at around the 200-day moving average great long-term premium name to own I wonder if this Union fight they're in is going to hurt them in terms of their image New York I see has now passed a ban on compulsory anti-union meetings at work and Starbucks is among the companies that are being targeted there certainly that's something we want to watch out for I don't think it's going to be a material impact or material negative impact to its overall revenues and earnings and as I said they're they're second largest market is China and that's going to continue to grow long term yeah that's amazing how lots of Asian markets that are drinking coffee now are having for the past few years absolutely thank you very much thank you Andy great to be here let's get to those top picks starting off the utility company forces yes Andy that was when I mentioned referred to earlier in the show so very defensive name regulated operations 99 of counselors under regulate operations it's a distribution and transmission of electricity half the revenue operating income from the United States so uh this is kind of you know our income stock we've held for many years we've been buy it here on this latest because it's pulled back from over 60 dollars kind of around 56 so we think for a capital return you could probably get about 10 percent and then it gives you a a yield sorry yeah up to 60 factors 60 gives you eight to ten percent capital and then the dividend yield is about four percent and that dividend they increase that dividend every year they've done it for 49 consecutive years they've guided they think they can grow the debt in four to six percent through 2027 based on their Capital plan and they really don't need any Equity funding to fund their Capital plan going forward as well okay um Thermo Fisher big maker of science equipment diagnostic gear yeah that's right they provide all the tools and products and services to the healthcare industry Farm big Pharma diet clinics biotech companies and this is a very recent addition to our portfolios thermal once again benefited through the pandemic with their Diagnostics and you know making of vaccines companies were using their products and services so it's about it's about off about 22 from its highs so been watching this sector very high quality company grows organically as well as through M A so they generated once again a Healthcare company that generate a lot of cash flow and earnings because of the Health crisis so earnings are going to be down this year but they've been able to read to employ that capital and make a few very attractive Acquisitions invest in r d so we like that space generally speaking they're very well positioned and so we were we just actually added this into our client portfolios last last week doesn't give you a very high dividend it's only about I think 0.3 percent because I feel they can use their cash flow their free cash flow they generates a lot of free cash flow to grow I mean just looking at the businesses they're in bioreactors and all kinds of pathology and growth areas yeah I mean they can supply if you want to run a lab like a for they can supply everything that's required to run that lab and they can help a pharmaceutical company go from you know truck from trial from all the different levels of developing a drug to actually manufacturing the drugs so they provide a lot of services to the healthcare industry yeah incredible them because they're obviously using microbes to manufacture things and yeah just um the rapid pace of progress and then finally Zoetis a big name in pet Healthcare that's right Animal Health Care so we've always for a couple of years now we continue to like this name uh through the you know about one-third is livestock and then two-thirds is Pet Companion which is pets and so obviously let us they're the leader in that space this company was from Pfizer back in I think 2012 but they've been in the business for over 70 years so the multiple you know it got quite High actually through when interest rates were very low and so it was a headwind when injury start to rise it impacted all uh growth stocks and as well as the lettuce they benefited through the pandemic in the sense that more people got pets because they were at home all the time so there was a question like when the communities have reopened you know does all of a sudden people give up their pets or what's going to happen but no I think that the growth area in Peck and pan is still very attractive they found that pet owners have gotten younger Millennials who tend to spend more on their pets pet visits are up now with the clinics reopening and the the spend per visit is up and as well Zoetis is they cover a very wise Spectrum that's like over eight species in many different categories within health care and Animal Health Care Andy the drug development is is um shorter doesn't cost as much and the shelf life of a product is much longer because there's a lot of generic competition and so like very good returns they're in very good areas when one of their successes over the past year is in the um a bit it's just this pesticide area for for dogs where it's flicks cheese and flicks ticks and worms and it's a monthly oral drug they do they call us a pericotrio they experience very strong growth there will be competition coming in later on this year but that's kind of an expanding Market that I think uh so let us can you do very well in and as well a latest drug that they're going to be launching in the United States is for pain treatment for dogs called labrella and so it's already available in Canada and the UK it's been very well received so we they feel that there's very good potential for this drug as well and so we like the long-term outlook for Animal Health Care and given the pullback the stocks had we think it's an attractive entry point to build the position what about Pet Value now the Chewie the big U.S retailers coming to Canada is pet valuer holding no I mean they're the retailers yeah right and so they sell Goods so we'd rather be involved on the higher value-added Spectrum in the annual Healthcare because these feel this company develops the drugs yes for pets and livestock so I think that you know the margins are higher the growth is um you know they provide more obviously the technology applied is much higher as well so we'd rather be in that end of the spectrum versus a pet retailer where you're just simply selling various Goods they're not actually even selling the drugs because to get Zoetis for their drugs you have to go to a veterinarian it's you know it's like going to the doctor to get the drives you can't really buy them at a pet retailer store no that's right um and pet drugs can cost a fair bit as well yeah yeah as any animal owner will testify thanks very much indeed first idea TD Bank yeah so I I think I get the the two big differentiators here I think for TDR one valuation you know this is a very well-run operation typically doesn't trade at a discount appears valuation wise it's trading at a discount appears and then you look at that excess Capital you know they they had a deal that they were trying to conclude that weren't able to do so you know they're sitting on a massive amount of excess Capital so if you look at you know where we are in the economic cycle and and the amount of excess Capital they have you know they can increase their dividend they can buy back shares you know they can invest in organic growth they've got so many levers to pull in a really difficult you know time in there like a really big difficult time in the in the environment so I think you know this is one that definitely over the medium term you know there's some good upside on the multiple and the earnings oh okay Rafe uh Raytheon Technologies not just defense of course no this is this is another one I think what you'll notice with all of the ones today all of the top picks is these are companies that are moderately or mildly cyclical but they have lots of excess capital and they can play offense in a really tough environment and so I think that's really I think a key thing for investors to kind of take away okay yes you can get scared when you're investing in this type of environment but there are companies who are going to take advantage of this and these are three companies that are very very well positioned to take advantage of kind of weakness in the marketplace and I think that the main driver for the upside in earnings for Raytheon is just you know they did you know it was a business that was combined a couple years ago so there's still some structural cost reductions that are taking place there and then you know as you know commercial air travel and Commercial Aerospace rebounds you know there's a lot more maintenance business and things like that for them so those are the two main drivers of kind of earnings upside over the medium term and if you look at the valuation very very reasonable today yeah so you'd uh stick with that one absolutely no okay um then finally Brookfield Corporation um there has I mean they've gone through this restructuring this bun off the asset management arm yeah um but this one it is down a bit over the past year um you'd stick with this or you you'd be a buyer right now absolutely and I think what you know essentially what what Brookfield is is a holding company for for all of their kind of holding all their other assets but what why they've gotten hit hard is because of their real estate exposure everything related to real estate has gotten hit hard and that you know that's a private business that they own within the Brookfield umbrella and I think what you get is you know this is a holding company with a lots of excess cash and if you look at their affiliate companies underneath you know there's more than 100 billion dollars in in in capital to invest in a in a tough environment and I think you know even just so far in this six months of the year how many Brookfield deals have gotten completed you know because they have big big dollars and they have you know platforms that are able to play to deploy Capital but I think they get that unique Arbitrage because you know at the holding company you know they're taking in lots of cash flow from the dividends that they receive from their companies and then they can look at where they see value uh you know among their companies and buy back shares selectively and issue share selectively so I think at the top of that holding company period is some very very unique Capital allocation opportunities that they have that will enhance compounding uh for shareholders over the longer term and if you look at the valuation you know it's less than 10 times cash flow and it's got a free cash flow yield kind of north of eight percent so so very very attractive value today eight percent although it looks as though the the Grim headlines on real estate will be coming for a while until this works out I mean there's a lot of buildings around the world that are probably underwater now well there's it depends on on when the loans were taken but I don't think the negativity on real estate is is especially commercial like especially office is going to go away anytime soon but if you look at the assets that Brookfield owns like it's it's tough to paint you know all the companies with the same brush because theirs is all like um you know it's kind of like the best office real estate you can get and so you know their data and you know their leasing activity still shows things quite positively and so I think this is one that it you know I guess anecdotally it's easy to slam office but I don't think all offices is performing the same you know those peripheral markets are getting hit hard and those core markets in in great places are performing very well and so I think that's essentially why this one has gotten hit so hard thank you very much Chris thanks for having me first idea is Visa yeah so Visa was the stock we'd like for a long time um you know to me it's it's very important because it's kind of a toll booth every time you use a Visa card they get some money from it they don't take any credit risk obviously because the credit risk falls on the banks that issue the Visa cards and I think Visa had a tough time during the pandemic which is going away because a lot of people weren't traveling and they get a lot of revenue from the traveling side of the business so travel has increased exponentially over the last little while so that's going to help them their B2B business is growing quite rapidly what I mean by that is small like there's always been larger companies that you obviously use Visa but small businesses now use Visa to pay for a lot of things the point system on Visa cards really helps them because people just want to get all those points for travel Etc so that helps them you know I think they've been on The Cutting Edge of the kind of mobile and mobile mobile environment so it really that really helps them and I don't think people can actually duplicate their their their their their their processing power so I think it's very important I mean they process a ton of transactions and the other thing is that the last thing is that people think get there's a ton of especially in the developing World a ton of people still use cash so there's a lot of international growth for them as well so we really like it we think it's a great great business to own yeah your next idea is TD Bank right so TD Bank like I talked about the banks with that gentleman earlier on TD Bank to me is you know trading at 1.4 times book it's trading at I think uh close to 10 times earnings I mean a little bit lower than that I mean 10 times earning I guess is where it's trading at right now next year's earnings 4.8 dividend yield it's got a great kind of it's great franchise in this country it's got lots of capital uh you know their their first horizon deals uh didn't go through which gives them a lot of chance to do something else I think uh you know TD's quite aggressive in buying on the U.S side I think as opposed to relative other other Canadian Banks so I think they will do something else and you know the one thing about our banking industry here it's a royal Diversified business right they've got a lot of fee income which protects them in a difficult environment yes loan loss Provisions are going up but if they don't use them all up because they don't have a bad loan business a a a default business on their loans they can actually put that into earnings so I think like I mentioned earlier I think this is a good time to buy Canadian Banks and I don't think think you're paying a lot for it I'm at these levels and I think you'll do very well in a year from now with them okay and then finally Johnson and Johnson one of your favorite names in healthcare yeah so Johnson Johnson this is a good company we liked it a great deal because it had these three prime businesses so they had sort of Pharma medical devices and they had consumer products they spun out a part of their consumer products business but they still own 90 90 of it so uh and uh you know the stock trades at 15 times earnings it's it's got a nice dividend yield 2.9 they've increased their dividends for I think for 54 years so I think there's a good opportunity to to to use the cash they got from the IPO to to kind of buy new uh on the Pharma side to certainly grow the Pharma Side by acquisition and maybe on the medical device side as well so that's what I think they're going to be using their cash for that 90 that they still own I think they may owe more than that actually but the 90 that they own will be distributed I think to existing shareholders uh this year so later this year next year and I can't remember the name of the the new company it's called Keen Keen view or kenview or something like that okay let me check that and what does it do again so it owns tylenolol it owns all the consumer products that so you know glass glaxco well uh glaxo sold out their consumer products business as well yes so yeah so that's what they that's what that new company owns pen views can views or kenview that's yeah yeah so can we use with the company that they own so we think that you know they have a chance to really re take that money and put it to work in the two other areas that they own um so but presently they own 90 of it still they still get the dividends from it I guess so so that's what I so I think we it's a great story is underperformed this year I think it's a great opportunity to buy the stock at these levels that's interesting yeah the talc thing of course has been a an adult lawsuit being a major weight on the stock for quite a while yeah so I true uh but I mean they're kind of used to dealing with lawsuits sure but I always I think they try to settle some of it right so and they didn't they weren't able to do put it into a different company to get to just to solve that problem but I think they're dealing with some of that issue on The Talk side so but they will settle it so I don't think that's as big a deal right um and the good thing about the chemu is that they didn't they didn't like when sometimes people IPO business they put a lot of debt into it they didn't do that which is a very good for that company right so I think there's an opportunity even with that company if you decide to own it to to maybe merge with a glaxo company as well down the road because they've got some really great products right Paul thank you very much indeed always a pleasure Gavin's first idea is London mining indeed well uh from the previous segment talking about thinning and the fact that we need lots and lots of uh the raw materials which will drive the uh the green transition so here is a Canadian Swedish copper Miner um 65 of its uh 3 billion US in sales last year was copper 15 each in nickel and zinc and about five percent in Gold uh but one of the interesting things about londine is it's uh still well below where it was earlier this uh in the last 12 months again it yes coppers off sort of 25 from a year ago and you go if there's going to be a recession obviously at the margin because as you know Andy um Dr copper is the metal with a PhD in economics because it's used in so many different uh economic activities uh but having said that every Ed needs between three and four times as much copper as a conventional oil and gas powered car and I think something like six times as much Metals in total but for London they have actually just bought a 51 steak and I think it's the cassarones mine in Chile which is about 100 K's from their biggest wine Candelaria and it's also about 20 K's from a major project in Argentina just over the uh the Andes called Jose Maria um for 800 million and they've got a chance to buy another 19 so that's going to stick 50 on their output of copper go from sort of 250 to 375 000 uh tons so you've got growth you've got um a pretty decent yield and it's only selling at 15 times earnings so all in all this looks to be a very attractive way of playing the Green Revolution um in a stop that hasn't uh taken off you've seen by the way uh that was it Barrett was looking at buying first Quantum or had been in talks with them in another major copper producer and of course Tech and glencore so it's an area where there's lots and lots of Market activity going on yeah as you say for about 950 million dollars U.S are going to acquire control of that casserole in his mind copper molybdenum in uh Chile you don't think though there's always a risk with these metals that if the price goes up enough on come Supply Just Dance swamps the market uh well how long is that Supply going to take to come Andy is it uh three years uh no is it five possibly probably it's closer to seven to ten the length of time it takes to get a major mining project up and running these days is absolutely staggering uh which is one of the reasons I think that the Ontario government's looking at maybe using the notwithstanding Clause to actually start to get things moving more rapidly in Ontario because of all the metals we're going to need for all the electronic vehicle factories and Battery factories we're building in Ontario out there they're still looking at roads I read going into the uh Ring of Fire and it's going to take Years yet so uh it uh well if if they if they want it and they want it within the time frame they need it they're gonna have to change it and that means changing the regular to the environment so we'll see how that works out it's just endless it seems yeah um your next name is uh trades in New York Watts water Technologies what do they do Gavin uh Plumbing uh basically as the name suggests they do plumbing and filtration and heating and and piping and the like uh they about 2 billion US in sales which they calculate is about 12 of the 15 billion US annual Market uh growing very steadily uh interestingly in Biden's infrastructure Bill Clean Water was the first thing off the top and here's a company that benefits from it 23 times but then on the other hand their margins continue to expand uh they're growing very very steadily and a very well-run company that's done very well and finally Bank of Nova Scotia something I don't know if you can call it a repair job but certainly yeah the new investors want the new CEO to get the stock moving again they do and interestingly a non-banking CEO from outside was it from was it from Finning yeah yeah small world indeed but um you know there are indications that they are looking at things which are not making a decent return on Capital I mean again for the Scotia it's been the worst performer of the big six um as I own it personally that's obviously a little painful but one of the reasons is that it's whole uh Mexico Colombia Peru Chile the Pacific Alliance markets which make up about a third of its profits are actually higher margin and higher growth than uh Canada but the market doesn't value them very highly a big Asset Management uh division which obviously with the bear market last year didn't help and obviously some disappointment over execution although it's usually the lowest cost uh you know sort of operator amongst the big six so um there were indications in the last quarterly statement that they are going to be looking with a fairly you know Keen uh glance at operations they don't think are earning a decent return so we might see some changes in the meantime what is it six and a half percent uh dividend yield and eight times earnings you know this is the cheapest it's been indeed the whole Canadian banking industry is selling for the cheapest it's been since the financial crisis this is really a big obvious no-brainer buy especially when rates start stop going up and in the meantime having gone up your net interest margin is expanding yeah yield as you say about 6.4 percent yeah and six point yeah I mean six point four percent on one of that nice Kersey oligopoly uh it's not the US the Canadian bank has not gone bankrupt in a century no one's cut their dividend for the last 40 years if you exclude Laurentian um this is not the U.S banking industry and the sell-off that resulted from that you know since very overdone do you think though the Canadian society and the economy pays a price that we have these big complacent Banks whereas anecdotally you hear in America banks will local banks will take more risks supporting entrepreneurs they will and also have more exposure to commercial real estate which may not be a good thing but yeah absolutely if you allowed uh somebody to come in um you know a major North American competitor to come in into the market but it's been tried and you've seen people like HSBC say in the end uh let's sell out who do they sell out to they sell out to RBC uh which is a good deal for RBC uh you know it's it's a very very difficult thing to break the Canadian banking oligopoly it's a very difficult thing to break into we'll leave it there Gavin thank you very much it's always great hearing from you I hope you can come back soon thanks foreign [Music]

Channel: BNN Bloomberg

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Id: MIAe7zDrBDg

Length: 27min 16sec (1636 seconds)

Published: Sun Jun 18 2023