| BUY | | Rona Inc | RON-T | 20.900 | “Best of breed” in the home improvement space in Canada. Low P/E because of the concern of investors on the housing market. Acquiring companies with good opportunities to make investments at reasonable prices. | 2007-01-03 | |
| DON'T BUY | | Home Depot | HD-N | 41.070 | For a long-term view of 2 or 3 years, the stock will be higher than it is today. However, 2007 could be a transition year for them. Earnings estimates have continued coming down. With stay on the sidelines for the time being. | 2007-01-03 | |
| DON'T BUY | | 3M Co. | MMM-N | 78.260 | Long-term prospects are not as rosy as he would like. Under the last CEO, the company was starved for R&D but were more focused on current margins rather than long-term sales. Huge producer of glass and flat screen TV's and there is concern about growing competition. | 2007-01-03 | |
| BUY | | Wal-Mart Stores Inc. | WMT-N | 47.550 | Just announced improvements in staffing levels of their stores. Expect a big move to improve margins as well as sales. Good entry point. | 2007-01-03 | |
| BUY | | Proctor & Gamble | PG-N | 64.540 | The kind of a stock that you could put in your portfolio and leave for years. High-quality company with some amazing brands in its portfolio. The Gillette acquisition last year increased the quality of the brands. Valuation is reasonable and you'll probably make 10% a year over a long period of time. | 2007-01-03 | |
| TOP PICK | | J.C. Penney | JCP-N | 78.060 | New management,4-5 years ago, began focusing on margins, merchandising. Margins have risen from 0% in 1999 to 10% in 2006. Expect this will go up to 12%. Strong sales growth. 14 X earnings | 2007-01-03 | |
| TOP PICK | | Pool Corporation | POOL-Q | 39.590 | Distributor of swimming pool products. They are a large, consolidated distributor between 2 fragmented bases, suppliers and customers, which gives them the most bargaining power. Attractive valuation. | 2007-01-03 | |
| TOP PICK | | CVS Corp. | CVS-N | 30.840 | Like the Shoppers Drug Mart of the US. Benefiting from an aging population. Generics are growing and retail pharmacies make more money off generics then branded drugs. Continuing to grow. Weak competition. | 2007-01-03 | |
| BUY | | Microsoft | MSFT-Q | 29.860 | Valuation is attractive. Not as risky as some other high-tech stocks. Likes the cash flow and the balance sheet, but little concerned that they will be investing in their new platforms and not getting the returns in the shorter-term. | 2007-01-03 | |
| BUY | | Dell Computers | DELL-Q | 25.490 | Valuation is attractive. Not as risky as some other high-tech stocks. | 2007-01-03 | |
| DON'T BUY | | General Motors Corporation | GM-N | 29.450 | Reasonable year in 2006, but he would not own the stock. An example of a bad company. Some very serious structural issues including labour and health care costs. Have several times more retired workers than active ones. Also questions the quality of their products. | 2007-01-03 | |
| DON'T BUY | | Deere & Co. | DE-N | 93.480 | Agricultural economy is what drives this company. His concern is his inability to forecast this part of the economy. | 2007-01-03 | |
| Comment | | McDonalds | MCD-N | 43.870 | Has done a great job in the last 1 1/2 years of getting its sales turned around. From here, it will be more on how they do in Europe. Valuation is getting a little bit full. | 2007-01-03 | |
| HOLD | | Johnson & Johnson | JNJ-N | 66.400 | This is a company that will have lower return, but more stable. There is a good opportunity for a return in the future. | 2007-01-03 | |
| DON'T BUY | | Caterpillar | CAT-N | 61.160 | Has recently had some issues. Decline in share price is because of slower truck sales as well as rising commodity prices. With manufacturing costs rising, margins will get squeezed. He is generally underweight the whole industrial space in the US. | 2007-01-03 | |
| SELL | | Pfizer Inc | PFE-N | 26.290 | If you want to stay in the pharmaceutical space, he would prefer Eli Lilly (LLY-N). | 2007-01-03 | |
| DON'T BUY | | Campbell Soup Company | CPB-N | 38.800 | Condensed soup has been in a decline for a number of years this is a problem for them. Getting more competition in the higher end of the market. | 2007-01-03 | |
| Comment | | Darden Restaurants | DRI-N | 40.320 | Have some good brands, including Olive Gardens. Shorter-term, there will be issues on the US consumer. Overall, a reasonable company and one worth looking at. | 2007-01-03 | |
| BUY | | Coach Inc | COH-N | 43.820 | Has been a great stock and a great company. He continues to hold this because of the quality of the brand. Gross margin is about 80%. Continuing to increase their store penetration. | 2007-01-03 | |
| BUY on WEAKNESS | | Starbucks | SBUX-Q | 35.250 | A great business because the way they have it set up. Penetration that they can get in cities is quite large, so expansion opportunities allow them to double their store base. Looking to expand internationally. Would prefer to buy in the low $30’s. | 2007-01-03 | |
| BUY | | Bank of America | BAC-N | 53.330 | Great company. Good valuation. | 2007-01-03 | |
| BUY | | CitiGroup | C-N | 55.250 | There has been a groundswell by investors to improve the company to have costs rise at a slower pace than revenue. Have just made management changes, which will start to see this happen. Good valuation. | 2007-01-03 | |
| Comment | | Target Corp | TGT-N | 57.180 | Prefers Wal-Mart (WMT-N), which is substantially cheaper. Also expect margins will expand faster. | 2007-01-03 | |
| DON'T BUY | | Gap | GPS-N | 19.310 | A stock that has had huge cycles over the last decade. A lot of this comes down to fashion and style. They have a lot of competition and the younger consumer doesn't seem to be embracing them as they did previously. | 2007-01-03 | |
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