Which stocks to buy on pullbacks?
I spoke with long-time strategist Paul Christopher of Wells Fargo Investment Institute this week and while he is cautious on stocks for the balance of 2024, he thinks it’s very realistic for the S&P 500 to climb 10% in the next year.
His year-end target for the S&P in 2025 is 6,000 — that’s roughly 6.5% above where the index currently sits.
And if there are market pullbacks, the sectors he’d be looking to add exposure to are communications services, industrials, financials, materials & energy stocks.
Will Canada’s stock market continue its record run?
Meanwhile, Lesley Marks, Chief Investment Officer at Mackenzie Investments told me she thinks the Canadian stock market could do well in the year ahead. Specifically, Marks believes the TSX could move towards the 26,000 level over the next 12 months.
That would suggest more than 10% upside from current levels.
Marks noted that while the index is trading at a record high, it’s only trading at 13x next year’s earnings – well below long term averages for Canada of around 16x.
In her view, the catalyst that could unlock the “under-valuation” is lower interest rates. The Bank of Canada has already cut rates three times in as many meetings and the Canadian economy is arguably more sensitive to rate moves than the U.S. economy.
Are energy stocks worth owning?
Energy has certainly not had the easiest ride of late.
But I spoke this week with Martin Pelletier of Trivest Wealth at Wellington-Altus Private Counsel. He remains optimistic about owning some energy names and shared the following reasons on why…
*OPEC will continue to keep barrels off the market
*inventories will continue to draw down
*demand growth, even from China, is chugging along.
*price variability should incentivize producers NOT to boost production
*that leads to paying down debt and buying back stock.
*technically, oil is still on the right side of the 200 day moving average
Pelletier’s largest weightings are Canadian Natural Resources and Suncor, but he’s been adding Cenovus. He owns the stocks for his clients, himself and for family members.
Top 15 most loved stocks on Wall Street
I was curious to know which stocks are loved most in brokerage research circles.
I put together a list of the equities with the most “buy ratings” on Wall Street.
To narrow down my list, each stock had to have coverage from at least 20 different firms. Having more coverage helps to build a stronger consensus.
And then to qualify, each stock had to have “buy” ratings from at least 90% of the analysts who cover them.
Here are the standout names…
Cenovus: 100% buy rated
Amazon: 96% buy rated
Microsoft: 96% buy rated
Delta Air Lines: 96% buy rated
UnitedHealth: 93% buy rated
Walmart: 91% buy rated
Boston Scientific: 91% buy rated
GE Aerospace: 91% buy rated
Infineon Technology: 93% buy rated
Schlumberger: 93% buy rated
Constellation Brands: 92% buy rated
Uber: 91% buy rated
Marvell Technology: 93% buy rated
Cheniere Energy: 91% buy rated
Targa Resources: 91% buy rated
How much interest is the U.S. paying on its debts?
One of the headlines that caught my attention this week was that the U.S. government — for the first time — has now spent more than $1 trillion in a single year on interest payments associated with the national debt.
And the year isn’t even over (the fiscal year on which the numbers are based ends in September).
The fiscal picture is often cited by a range of investors, including both gold and Bitcoin enthusiasts, so I wanted to chart how interest payments have risen in recent years.
One thing I learned during this exercise is that a lot of people (and media outlets) are not consistently using the same data set to measure this…so be careful on that!
Since the headline this week came from the U.S. Treasury Department’s figures, I looked only at their past updates to ensure the year-over-year comparisons were accurate.
The takeaway? Those interest costs have ballooned, rising nearly 150% since 2016%.
Here’s the breakdown…
Interest costs on U.S. federal debt:
2024: $1.05 trillion (first 11 months of fiscal year so far)
2023: $879 billion (full year)
2022: $718 billion (full year)
2021: $562 billion (full year)
2020: $523 billion (full year)
2019: $573 billion (full year)
2018: $522 billion (full year)
2017: $457 billion (full year)
2016: $430 billion (full year)
Source: Treasury Dept
Why Coca-Cola is Warren Buffett’s longest-held stock
There is one stock in the Berkshire Hathaway portfolio that Warren Buffett has held longer than any other: Coca-Cola.
Buffett first started buying shares in 1988.
Coca-Cola is one of the rare companies that has earned “dividend king” status, having increased its annual divided consecutively for more than 50 years.
That means Berkshire has benefited from higher dividend payouts every year that it has owned the stock.
I decided to crunch the numbers on how much that has netted Berkshire over the past 30 years. The answer? More than $11 billion!
Here’s the annual dividend breakdown…
2024: $776 million
2023: $736 million
2022: $704 million
2021: $672 million
2020: $656 million
2019: $640 million
2018: $624 million
2017: $592 million
2016: $560 million
2015: $528 million
2014: $488 million
2013: $448 million
2012: $412 million
2011: $376 million
2010: $352 million
2009: $328 million
2008: $304 million
2007: $272 million
2006: $248 million
2005: $224 million
2004: $200 million
2003: $176 million
2002: $160 million
2001: $144 million
2000: $136 million
1999: $128 million
1998: $120 million
1997: $112 million
1996: $97 million
1995: $88 million
1994: $75 million
Stock returns since going public…
As a brief reminder of the power of long-term investing, here’s a look at some stock returns since well known companies went public…
Stock returns since IPO:
Walmart (1970): +805,900%
Nvidia (1999): +476,300%
Microsoft (1986): +442,894%
Amazon (1997): +248,553%
Apple (1980): +222,400%
Netflix (2002): +58,162%
Costco (1985): +54,750%
Nike (1980): +43,868%
FedEx (1978): +38,084%
Starbucks (1992): +29,245%
Tesla (2010): +20,280%
Google (2004): +6,174%
Visa (2008): +2,512%
Facebook (2012): +1,281%
Picks of the week: big retail names to navigate consumer uncertainty.
I spoke with Keith Gangl of Gradient Investments, who notes consumer stocks (in general) have been under pressure as discretionary spending slows and consumers focus on value. He likes Costco, Walmart, Target and Amazon for the following reasons…
Costco:
· Valuation is not cheap but a consistent compound grower (40x outyear PE)
· Growing sales high single digit
· Focused on providing value for consumers
Walmart:
· Like COST not cheap but a consistent grower (28x next year EPS)
· Expected to growth EPS double digits next few years
· Most recent quarterly was very strong – beat on EPS and comps and solid guide
Target:
· Unlike COST & WMT it has been an under-performer with reasonable valuation
· Recent quarter a step in the right direction
· Believe they can play some catchup with WMT
Amazon:
· Like the mix of consumer side mixed with the technology business AWS
· Stock has been in the middle of the pack of the Mag 7 and offers value
· well positioned with AI on the consumer and advertising side of their business
Additional picks of the week
Liz Miller, Summit Place Financial Advisors: Sweet Green, SL Green Realty