BNN - Friday, May 24, 2024 - 01:00 p.m. (ET) - Segment #2

not this was in our view, probably the last kind of gas into the long weekend, memorial days on monday. You usually get kind of maybe a run up for a reversal of the previous day. But we think that we should be in a corrective this is typically the time when you get some kind of a seasonal correction. We're not saying sell in may and weight back to october were saying sell in may and may be revisit into the end of june. So looking for a small correction, how small it will be will see. I don't have a perfect crystal ball, but I would think 2 to 10%. I know it's a wide range, but it depends on what happens with geopolitics, interest rates, commodity prices, fund and I guess whole that is not really a warning to sell, but maybe in a device that if you stocks that you like the chair. >> Maybe missed the boat on that, you might get a nice opportunity in the next month or to add them to your portfolio. Absolutely. So we're not saying run away from equities were saying, keep your powder dry. >> There are some very interesting opportunities. We have a huge by list that we've been developing. But as value investors were very price sensitive. And so we want to make sure that when we buy and we have a margin of safety. And so we're patient. So what's an example of one of these valuation. My god, there's so norfolk southern, okay, one of the big railroads in the we quite like what management is doing with all the it's not cheap enough yet, not yet. Not yet because remember that norfolk is part of the transportation index and we believe the transportation index is going to have a little bit more pressure on it. It's got typical seasonal pattern going down into june. So we think, you know, 5.10%, so maybe below $200, that could be a very price point to get I'm glad that you brought up the transportation index that is a sector that is not doing well. It's not just the rails, but it's also the truckers. And you know, traditional or has it that it's not good. If transportation index >> Isn't doing well, it you know, telegraph great things in the economy. Should we be more cautious than you are about the markets, given the transportation may be flashing warnings. >> I don't think so. And I think part of the reason for that is that first of all, we're not buying the index necessarily. We're buying companies. So. I always caution people that no matter how bearish they are, there are some wonderful businesses, wonderful management teams out there that if you buy them at the right price, you will be successful. Having said that, I think that there's one tailwind that, you know, it's not really necessarily baked into prices yet. And that's the reshoring right? So if you think about all of the transportation within the continental united states, that needs to occur due to the reshoring. On top of that, all the world trade. You know, people think that world trade is down. It's not. If you look at cargo shipping rates, they've been because of the red sea and the hutus and all of that stuff. But you know, trade is proceeding at a pretty robust clip and you know, gdp is hanging in there. So that means goods are still moving as norfolk, the only rail because cp kansas city has also been under pressure cn to a lesser extent that that that they're all under pressure. Right? But we like the management and the opportunity to are under active al you at norfolk. >> So that's fedex is another disclosure. We own fedex. We got in. So a lot of transports. Well, it's not specifically the transports again, the yes, they are both transportation stocks, but in both cases, management is key and management is really got a lot of levers to pull. There's a lot of other opportunities that we're in many other sectors like financials, retail insurance in you know, when you say management is key and makes me think about td, we were just talking about the stock yesterday and they've got this big issue with the anti-money staff. >> That they're dealing with. Wonder if that's the only thing keeping the stock and down. What what do you say like if operationally, they're doing what they're supposed to do. Would you by so we like to be okay. Yeah, we are looking at td td in our opinion is a premier but we think there's going to be more pressure on the banking stocks in general. >> And td specifically td

specifically, we think because there's a big red flag right now on them. And the problem is, we don't know what the size of the fine is going to be. There are many regulators now probing into what happened and where the dysfunction was. Number 2, there's going to be most likely a lot of investment into it. Systems for command and control purposes of aml. Another. Variability in their operations and then see they're going to most likely be precluded from either buying somebody or expanding. I mean, they are already the 10th largest U.S. financial. So that may not be a huge issue, but they've also been very good at doing tucking acquisitions, which is probably off the table for the next little while. The bigger issue for us is the credit cycle and we've been thinking about this for a while. We don't know when it's going to happen, but we're fairly certain that these loan loss provisions are not at the end. There may be at the middle of the stage and we still have another 2 to 5 quarters to go. So we think banking in general may be a little bit under pressure, but especially. >> You know, you mentioned health care and that's a really fascinating sector right now, especially for a value person. Yes, he's you got to make sure you do get caught in a value trap right tonight. Imagine there's a lot there to lure you in managed care. In biotech, you know, and pharmaceuticals, you have a pfizer in the pharmacies, you've got cbs, walgreens all back lot of basket cases. Are you picking up any of those basket case? So full disclosure we do on cbs and we are looking averaging down and picking up a little bit we think cbs is a wonderful operator. >> We insignia and we sold it higher. It's now pulled back, not enough of a pullback for us to re-enter, but certainly definitely on the list. One of our favourite hm owes a wonderful operator. Great returns on capital >> Great cash flows, a wonderful risk management and insurance. We do own manulife. Still. It's up a we think they're still upside there. We didown jackson financial huge win for us. If that one pulled back, we'd look at it bright house financial is another one that we would look to add a cheaper price of this. You've got to pick your spots because to your you know, within the sector, there are places where you may want to participate in their places, that to your point of value trap, you want to stay away from while let's use your cbs as an example, you want to average down and and by and we just sites, it's been investor eytan. >> Then compare it to competitor walgreens is trapped. Sort of like coca-cola and pepsi, walgreens missed the boat on diversifying their platform. I mean, they sort of tried to do it after cbs did, but I think they did it too little too late cbs has a great management team. They have a great store footprint, but between their pharmacare business, their medical practitioner business, their hmo business and the drug business. You've got like a coming many conglomerate. But within the health space. And we think that, you know, while some of their acquisitions panned out better than others, they have so much cash flow and so much free cash flow to pay down the debt to keep paying that dividend out to keep reading for us to find their business where as walgreens. At one point in time, you would have said walgreens was one of the best managed companies on the planet. In fact, if I'm not mistaken, there was a there was a book that was written about walgreens and about how you know, the management for so many years or so pristine somewhere somewhere along the line, something fell off the rails. And I don't know exactly one and they couldn't pinpoint that for you, but that's how companies are dynamic. And we as portfolio managers, we have to keep a very keen eye on what management is doing. That's that's a really good point that it's not just a throwaway thing. People saying, oh, the managers are good like it. It shows walgreens is at. >> Mosul since 1998. So a lot of value destruction thanks so much, mike, for joining us as my are joining us. Part of I a private wealth. We're going to take a quick break. We'll speaking of td. We've got nigel d'souza, bank analyst at veritas. He's cautious on the sector with one exception. Yes. Barrett asked does have a bye on one canadian banks will tell you what it is when we come back. (Mid-tempo music) Welcome to Own Your Sharewith RealShare. I'm Glenn Baxter with CompanyCEO Shaily Srivastava and President Adi Koparde. RealShare is a new onlineinvestment platform specializing

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