Lorne Steinberg, President, Lorne Steinberg Wealth Management
FOCUS: Global Value Shares and High Yield Bonds
MARKET OUTLOOK:
The high level of inflation has lasted longer than expected, leading to aggressive rate hikes by the Federal Reserve. The war in Ukraine has increased pressure on commodity prices, while supply chain problems and labor shortages persist. There are already indications that rate hikes are impacting as the housing market has begun to cool.
It is worth noting that it usually takes the economy about nine months to experience the full impact of interest rate changes. That’s why there is a growing concern on the part of investors that the Fed may “outperform” if it raises rates too aggressively, which could lead to a recession.
Rising yields, the war in Ukraine and the fear of recession have caused markets to sell out and opportunities abound. As we look forward to the next twelve months, the war in Ukraine is likely to end (possibly to no one’s satisfaction), supply chain problems will ease and the rate of inflation should be significantly lower than the current.
Fear and uncertainty always give investors a long-term opportunity and the current situation is no exception. In today’s market, investors can buy some of the world’s big business for sale, which should lead to substantial wealth creation over the next few years.
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BEST SELECTIONS:
Lorne Steinberg’s best options
Lorne Steinberg, president of Lorne Steinberg Wealth Management, talks about her best options: Amazon, Morgan Stanley and Berkshire Hathaway.
AMAZON (AMZN NASD)
The technology sector has suffered more than most, as rising yields have caused the valuation multiples to be compressed. Amazon’s revenue will exceed $ 500 billion this year as it continues to expand into new business, typically with flawless execution. It has financed this growth through its cash generation and we expect earnings and free cash flow growth to accelerate over the next few years. The recent fall in stock prices offers investors the opportunity to buy this large company with a margin of safety and a significant rise.
MORGAN STANLEY (MS NYSE)
Bank shares have been another victim of the recent market crash and Morgan Stanley is no exception. This company is the largest asset manager in the United States and has reduced its exposure to more cyclical businesses such as commercial and investment banking. The company has been exceptionally well managed, as evidenced by its growth and profitability since the financial crisis. The stock is currently trading at a P / E of 10, with a dividend yield of 3.8%, a really compelling value.
BERKSHIRE HATHAWAY (NYSE BRK.B)
Berkshire Hathaway shares are lower today than they were a year ago, giving investors a truly unique opportunity. The company is the largest shareholder of Apple, whose shares have fallen with the technology market. Berkshire is also a major insurance company thanks to its ownership of GEICO and other insurance companies. Of course, it also has a large portfolio of private and public companies that have created exceptional value for many years. Despite criticism for having a large cash position, the company is now perfectly positioned to deploy its cash at opportunistic prices, as it has successfully done in the past. Although Buffett and Munger are now in their 90’s, they have hired successors capable of running this company following its basic principles.
PREVIOUS SELECTIONS: June 28, 2021
Lorne Steinberg’s previous election
Lorne Steinberg, president of Lorne Steinberg Wealth Management, talks about his previous election: Compass Group plc, Corning Incorporated and Taiwan Semiconductor Mfg. Co. Ltd.
Compass group (CPG LON)
- Then: 1509.00 GBp
- Now: 1695.00 GBp
- Yield: 12%
- Total return: 14%
Corning (GLW NYSE)
- Then: $ 40.99
- Now: $ 32.27
- Yield: -21%
- Total yield: -19%
Taiwan Semiconductor (TSM NYSE)
- Then: $ 119.61
- Now: $ 87.62
- Yield: -27%
- Total return: -25%
Average total return: -10%
CPG LON YY YELLOW NYSE NN TSM NYSE YYY