Benjamin Lau’s firm Apriem Advisors uses three main investment strategies for managing assets for high-net-worth clients. The core strategy is a customized buy-and-hold strategy; the income strategy aims to generate a high level of income; and the Tactical Index strategy is the fastest-growth strategy.
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CEO Henry Beukema III of Guyasuta Investment Advisors says Allergan plc Ordinary Shares (NYSE:AGN) is well-positioned to work through pricing headwinds in the pharmaceutical space and over time should meet or exceed analysts’ expectations.
The reason we find Allergan attractive is that 41% of their business is private pay. And while we do think that there will be pricing headwinds in the pharmaceutical space going forward, we think that they’re well-positioned to be able to work through that, especially given that they have upcoming products in their pipeline. If those products end up getting through all the regulatory approvals and have strong effectiveness, then they’ll be able to have some element of pricing power.
We like Allergan based on the valuation. It’s currently trading at around 12.5 times forward earnings. And we’re using a conservative $15.50 per share for the 2017 estimate.
We think that health care, in general, has been out of favor, and Allergan has also been out of favor because they have recently sold their generic assets to Teva (NYSE:TEVA). And as analysts have reset their models, the company has not yet achieved a quarter where they’ve either met or beaten expectations. And we think that, over time, as the operational execution continues to improve — and we look at the fact that our forecasts have them growing in the mid to high single digits on the topline with mid-double-digit-type growth on an earnings-per-share basis. We think that that’s attractive here, but we just need to get through a few quarters where they show the operational execution and meet or exceed the analysts’ expectations.
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Mike Rizvanovic discusses his coverage of Canadian banks. He says for next 12 months the outlook is a bit challenging from a revenue growth perspective because of the struggling economic backdrop. He says what is underappreciated from a global perspective is that Canadian banks sit in a different environment on the regulatory front and have been resilient in the last couple of years. However, while Canadian banks are world-class and a good investment versus banks in Europe and the U.S., Mr. Rizvanovic says banks in Canada are valued for that differential and are not cheap.
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CEO Henry Beukema III of Guyasuta Investment Advisors says Nestle SA (ADR) (OTCMKTS:NSRGY) is looking to increase its organic growth profile while also focusing on healthier product offerings.
Already, Nestle has around 3% to 3.5% organic growth trajectory, but their stated goal is to be closer to 5% or 5.5%. We think that this is a company with a very good balance sheet and with the ability to focus on increasing operating margins and having a reasonable valuation as well as having an over 3% dividend yield. This is attractive in the current environment.
We think that Nestle has focused as a packaged food and beverage company but also has a strong focus on nutrition and health and wellness. And as we know, sugar continues to be a focus area for nutritionists and for consumers, who are seeking healthier choices, but ones that still taste reasonably well. In other words, we don’t want to give up the idea of having tasty snacks, but we seek the ones that hopefully have less negative health effects.
Nestle’s reformulation or potential for a lower-impact sugar derivative could be very helpful in the long-term strategy of trying to continue to offer healthy but tasty food as well as, you know, focus on potential areas where they could sell that to other companies for their snack and confectionery divisions.
So we think this could be interesting going forward. The history of different sweeteners has been somewhat mixed, and so we’re not counting on this to be necessarily a strong catalyst. We think that the most significant catalyst is just the ability for them to bring up their operating margins over the medium and long term, but we think it’s very positive that they are focusing on ways to make healthier but still tasty snacks.
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Richard Bove talks in-depth about the state of regulations on U.S. banks. Mr. Bove points to evidence that the regulation of banking has been punitive for banks and that the justification for the regulation may not be merited. Mr. Bove says an increase in interest rates would be very beneficial to banks, and right now the sector is perhaps the most attractive investment one can find.
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Northeast, Mid-Atlantic and Southeast banks, along with banking in general, are expected to see change in the economy as a result of the recent U.S. presidential election. Some analysts say Dodd-Frank is unlikely to be repealed because there are many rules put into place already through regulatory agencies like the Federal Reserve, the SEC and the CFTC, that it would take years to figure out which rules belong to the bill and then repeal them. Moreover, they say populist political climate would prevent lessening regulations, but more importantly, the regulations could remain in place independently from the bill through the agencies’ regulations.
The new administration, however, may be able to change the Federal Reserve through appointments, and the president-elect is expected to have a chance to appoint four out of the total of seven members of the board through his tenure. A new majority in the board could change priorities for the Federal Reserve. The current performance of the Federal Reserve is debated among analysts, some saying it has done a good job in the last few years, whereas others say it’s acting in erratic ways, saying that increasing the money supply via quantitative easing is in direct conflict with making banks purchase government bonds.
The general outlook has changed since the U.S. elections. U.S. bank stocks have rallied quite strongly, analysts say. They underperformed in 2016, but they are expected to continue to outperform on the back of rising rates, which analysts say is beneficial to net interest margins. They also expect a pickup in lending volumes if the new administration delivers on promises of reflationary measures, and they say there is a stronger growth profile in the U.S.
Analysts say banks are some of the most attractive investments today. In 2015, they had the highest earnings in the history of U.S. banks. In 2017, earnings could be very high too if they economy grows at a 2% rate and interest rates are raised by 25 to 50 basis points. In terms of valuation, they’re not above average right now. Analysts also say industry fundamentals are actually very strong at the moment.
Some analysts say U.S. banks should be able to leverage more. Foreign banks are larger and more leveraged, and this will have implications for the U.S. They say the Financial Stability Board erroneously said U.S. banks were the riskiest and should be penalized by having higher capital requirements. The Chinese banks were deemed the safest, and European banks are now having fewer problems according to this board. Analysts say this defies conventional wisdom given the problems in European and Chinese banks that have been reported, as well as the reports saying that U.S. banks are doing better.
Analysts say the market expected the new administration to provide market stimulants to boost growth. A better domestic environment may provide a spur to M&A activity in banking which slowed in the first half of 2016, but may pick up again. Lower tax rates may fuel M&A too. However, higher rates could affect loan volumes as people take less loans.
U.S. banks in the last few years were focused on lowering costs. They have shifted personnel to lower-cost locations, and digitalized/automated processes like equities and fixed income trading.
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Steven Abernathy discusses running a family office. Mr. Abernathy says there is an underserved need for firms dedicated to wealthier families. He reflects Warren Buffet’s advice for seeking an adviser: Choose an adviser that is both honest and competent. He also says every adviser should have owned and run a business for at least a decade. Mr. Abernathy says that since the election, he has started to reallocate assets for the families he represents, and he is watching interest rates closely. He has increased the firm’s subjection to variable rate assets, and on the equity side, the international component has been reduced.
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Jaap van der Hart talks about managing an emerging markets fund. Countries he likes the most at the moment are Korea, India and China. Mr. van der Hart says Korea is interesting because of its very attractive valuations, while India is the best growth story in emerging markets. Within India, he likes oil refining and fuel distribution companies as well as the private banks. However, he believes countries are more important than sectors when it comes to investing in emerging markets.
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President and CEO Phillips Baker Jr. of Hecla Mining Company (NYSE:HL) says that over the last two years the company has had historic production, and he expects to exceed that production in 2017 with the start of a new mine in Mexico and the expansion of a mine in Quebec.
Hecla’s share price since the beginning of the year has gone from about $2 to well over $5 today. It has been quite a remarkable rise that is substantially more than our peers have experienced…
You have, at Hecla, not only the startup of a new mine in Mexico but the startup of a new open pit at the mine in Quebec, the completion of our #4 Shaft at the Lucky Friday, and you’ve got Greens Creek that is really firing on all the cylinders with substantially more production than it’s had recently. In addition, there was the acquisition of the Montanore project in Montana.
So all of those things together caused this substantial outperformance, which has really created a new base because we believe these are largely sustainable improvements that we’ve been able to accomplish.
And we’ve taken a different attitude than most of the industry. Back in 2014 and 2015, when prices declined, the prevailing attitude was to sell assets, hunker down and underspend your capital requirements, but we didn’t take that approach. Instead, we said, this is the time to invest, to grow. And so as a result of that, we’ve seen the sort of share performance that we’ve had.
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Robert Wenk discusses his approach to selecting funds. He uses a best-in-class approach and analyzes select funds based on quantitative and qualitative criteria. He says the goal is capital preservation and a steady income. As far as trends in Switzerland, he says the world has become extremely globalized, and Switzerland is in a wait-and-see mode. He discusses recent events in Europe and the U.S. and how they have impacted his investment view.
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