John Heffern is the Principal and Founder of KCA/Princeton Advisors

John Heffern, Principal and Founder, KCA/Princeton Advisors

John A. Heffern is Principal and Founder of KCA/Princeton Advisors, LLC. His career includes nearly 30 years of senior level portfolio management and equity research mandates. He leverages a deep background in financial services for investment selection across a wide expanse of companies, themes, and factors. The fund follows a qualitatively oriented process in portfolio construction that is unique in the industry.

In his 3,169 word interview, exclusively in the Wall Street Transcript, John Heffern discusses the start and current performance of his asset management firm.

“…We’re approaching five years of operation and that followed almost three years of incubation. The fund is a limited partnership. We are fortunate to be able to say we haven’t had a down year for performance over all those years.

I think our confidence in our strategy comes from 30 years of investment management and sector experience that spans sell-side research, buy-side portfolio management, growth and value investing, as well as corporate governance as an independent director.

So we know our companies, our managements, and business models across the full range of opportunity including banks, specialty financial services, insurance brokerages, asset management REITs and even fintech…

When we say do research, we’re old-school tire-kickers, visiting the companies, meeting the managements, assessing non-quantitative factors like corporate governance as we arrive at a conclusion about where a company may be headed, and how it may be valued or misvalued in the market.

So, we spend a lot of time talking to our sources and thinking about business models, competitive moats, margin opportunities, innovation — all sorts of concepts and ideas that can’t be captured, necessarily, in a quantitative model that looks backward. Our qualitative approach tends to look forward, and focuses as well on execution, reliability and durability.

So the key to that research approach is experience, where we have seen many, many business models, met many, many company managers, and learned the signage of success and failure. That’s what we put to work. We think a qualitative approach has gone from the majority of the investment management research business to the minority. But we like where we sit, and that’s how we approach it.”

John Heffern does not mince words when it comes to ETF investing:

“I think that’s why you’ve seen the industry provide, and the individual retail investor gravitate toward, more passive-oriented approaches to investing, like ETFs and indexes. They have capitulated, ultimately, to the challenge of doing this qualitative research into understanding individual companies.

And really just moved their investment allocations toward broad pieces of the market, whether it’s themes or company sizes — small cap, large cap, value, growth. Any flavor you want is there in terms of baskets for investment opportunity.

And for most people, that’s probably appropriate.

Having said that, we think this environment creates opportunity for investors like us, who still do the work company by company, who have the experience and the capacity and the contacts to sort through the baskets to find the best.

We also believe, for the long run, we can avoid owning a lot of companies that, if you could do the work yourself, you just never would want to own as part of your portfolio.

So ironically, as the world has gravitated toward passive indexing and basket allocations, we think the opportunity for stock pickers like us is enhanced. As we go forward, we have no shortage of ideas, no shortage of opportunities, and are really encouraged about what we see, particularly in the areas where we specialize.”

Due to the increase in liquidity from government management of the COVID 19 crisis, John Heffern and his colleagues see the financial sector as the most lucrative for investors:

“We’re thinking in terms of well-researched baskets of opportunity — it is the theme we’re following within the portfolio. And we’re doing it in two places: first, in the banking space, as we’ve discussed, and second, in the insurance space.

In the banks sector — and you can take all of these or none of these, that’s totally up to you — the basket that we’re using has a handful of companies that come to mind. One is Bank of Marin Bancorp (NASDAQ:BMRC) in Novato, California; Bank of Princeton (NASDAQ:BPRN) in Princeton, New Jersey; Civista Bancshares (NASDAQ:CIVB) in Sandusky, Ohio; and then one more, Preferred Bank/LA (NASDAQ:PFBC), which is an Asian-American bank.

All of these are well capitalized, well managed, strong franchises in good markets, where we see growth opportunity. But ultimately, we see them as consolidation candidates which could gain as they are sold to larger organizations consistent with the consolidation theme we are seeing across the industry.

Turning to the insurance sector, we find different circumstances. As we talked about, banks are chasing loan demand and pricing is very competitive. The insurance business, particularly property/casualty insurance, is benefiting after a decade of intense price competition from very favorable conditions where demand is strong and pricing is actually going up meaningfully.

And so our basket of opportunity there too is focused on well managed, well capitalized players who benefit from this development.

Two property/casualty insurers in particular come to mind: Chubb LTD (NYSE:CB)The Hartford Financial Services Group (NYSE:HIG), and then our favorite insurance turnaround remains American International Group (NYSE:AIG), which after 10 years of restructuring itself seems to have finally turned the corner and still looks very inexpensive to us.

So that’s our basket of opportunity approach, as we look across banks and insurance companies.

And if we finished with a look at financial technology, which we spent a lot of time talking about, the ideas in our portfolio that match the theme are MasterCard Inc. (NYSE:MA)PayPal Holdings (NASDAQ:PYPL) and Square (NYSE:SQ), all very firmly in payment services networks around the globe and places where business and opportunity seem to be gravitating as it all moves away from the legacy financial services companies.”

To get all the detail on these and other top picks from John Heffern, Principal and Founder of KCA/Princeton Advisors, read the entire 3,169 word interview, exclusively in the Wall Street Transcript.

John A. Heffern,Founder & Principal, KCA/Princeton Advisors, LLC.

www.kcaprinceton.com

email: jaheffern@kcaconsult.com

Sylvia Jablonski is the CIO of Defiance

Sylvia Jablonki, CIO, Defiance ETFs

Sylvia Jablonski is Chief Investment Officer for Defiance ETFs. Ms. Jablonski manages Defiance’s retail and institutional investment research, capital markets and thematic ETF model portfolios. She is a recognized pioneer in the ETF industry.

Acknowledged as a top expert in the ETF space, Ms. Jablonski is frequently featured on CNBC, Bloomberg and in The Wall Street Journal.

In her 3,467 word interview, exclusively in the Wall Street Transcript, Sylvia Jablonski discusses the start up of her asset management firm Defiance ETF and what makes it different:

“One of the other Defiance co-founders, Matt Bielski, and I had worked together at Direxion for some time, and developed a business together within one, so when he left to start Defiance, I knew it would disrupt the ETF industry and pave a new and exciting future.

I joined him, Paul Dellaquila, Jacob Ingram, and the four of us were just really motivated to build out not only a new ETF company that thinks about things differently, but a fintech asset management firm that would challenge everything.

So on the ETF side, we tend to launch products that are different, and we think about innovation and disruption and what the next decade will look like — as in the trillions of dollars that are sitting with baby boomers, plus are eventually going to trickle down to the kids that have started trading now during COVID that are between, let’s say, those from 13 to 30.

I don’t know that there were products that are perfectly targeted to them and their needs.

So we tried to think about who’s the next-generation trader, and what is the next generation of interesting product indices, themes, disruptors, innovators, and we launched our products based on that thesis. We also have a part of our company that is focused on digital marketing and distribution 2.0.

We disrupt marketing and old-school classic advertising that doesn’t necessarily work in the financial sector, with new and innovative ways to create stellar product messaging to the public.

Then there are some other things that we’re working on too whereby eventually we’re going to be a full-fledged fintech asset management firm serving everything from products, investing and marketing.

It is a super exciting time for us.”

Sylvia Jablonski discusses her methodology for constructing a new ETF:

“What we do is look at companies that are involved in managing volume — the amount of data, the volume of data — and we’re looking at data that’s collected from different programs, databases, languages, takes different shapes in terms of files, whether sizes, Excel, CSV, SQL, video, text, PDF, graphics, whatever it might be.

We look at the companies that gather all of that data.The next thing that we do is we look at companies that make it readable and accessible and sort of analyze it. We look at companies that are involved in the Internet of Things, so data infrastructure, for example, as in API management companies.

A couple examples are Splunk (NASDAQ:SPLK)Cloudera (NYSE:CLDR) for big data analytics, and, for accessibility, that would be a Palantir (NYSE:PLTR) and a Snowflake (NYSE:SNOW). So basically, we analyze the universe for who these companies are and then we come up with the rules.

The index that we track — we work  with an index provider and we give them the information to come up with the parameters for the index.

So that provider is the BlueStar Big Data & Analytics Index, and it pretty much tracks companies that get at least 50% of their revenue from the sub-themes that I just discussed, so data management, platform, development operations, analytics, visualization software, API software.

There are companies that have to have at least $500 million of market cap, and an ADV of at least $3 million in the last couple of quarters and listed on a National Stock Exchange. So we look for pure-play big data companies and essentially create this index that tracks them.”

Defiance CIO Sylvia Jablonski is on the look out for hot sectors to develop into easy investable ETFs for her customers:

“We launched our psychedelic ETF. We’ve launched a hydrogen ETF. So we have quantum computing, 5G, a couple other ETFs. Those listings are the more recent disruptors…

I don’t know that ETFs have to be particularly helpful in terms of combating inflation, but they give you access to sectors that perhaps do well in inflationary markets. With us, we don’t really think that there will be a big impact on our specific themes as they are lifelong opportunities almost regardless of the day-to-day news.

For example, psychedelics aren’t going to be impacted by inflation. Hydrogen, the conversion to alternative energy, so much of that is going to be based on spending, and government spending seems to be going towards infrastructure and alternative energy build out. So we don’t think that inflation will impact that negatively. We don’t really have any consumer discretionary ETFs and perhaps consumer-based ETFs will suffer.

I mean, I personally just don’t think that inflation is going to be the thing that sets us back in the markets. I think that I’m on the side of saying it’s transitory. I think it’s going to stay at certain levels, and perhaps grow a little bit more, but I’m more in the camp of I don’t think that used cars are going to continue rising 45% every quarter over quarter. I just think that a lot of this stuff is targeted to the reopen and it’s hitting a lot of those sectors.

So I think that the things that we do are sort of longer-term things. They are five to 10 years out. Quantum computing is just getting started, right? I don’t think that you could argue that the prices for semiconductors will not be higher for these companies who run these computers. But I don’t really think that there are things that are going to hold it back.”

Get the complete picture and all the detail by reading the entire 3,467 word interview with Sylvia Jablonski, CIO of Defiance ETFs, exclusively in the Wall Street Transcript.

Sylvia Jablonski, Chief Investment Officer

Defiance ETFs

www.defianceetfs.com

email: info@DefianceETFs.com

 

Gbola Amusa is a Partner, Director of Research and Head of Healthcare Research of Chardan.

Gbola Amusa, MD, Healthcare Research of Chardan

Gbola Amusa is Partner, Director of Research and Head of Healthcare Research of Chardan. Dr. Gbola Amusa joined Chardan at the end of 2014 to focus on identifying companies that will generate exceptionally high long-term investment returns by creating shared value for society.

Dr. Amusa was previously Managing Director, Head of European Pharma Research, and Global Pharma and Biotech Coordinator at UBS, where he oversaw 25 analysts and ultimately finished as the number-one-ranked European pharma analyst in the Institutional Investor — II — Survey.

Dr. Amusa earned his BSE from Duke University, an M.D. at Washington University Medical School and his MBA from the University of Chicago Booth School of Business.

In this 5,116 word interview, exclusively in the Wall Street Transcript, Dr. Amusa states the case for Regenxbio (NASDAQ: RGNX):

“We have our top picks for genetic medicines as MeiraGTx (NASDAQ: MGTX), uniQure (NASDAQ: QURE) and REGENXBIO (NASDAQ: RGNX)…The second one that I’ll talk about is REGENXBIO, which has innovated on vectors that are used by up to 10 to 15 companies, if not more, in the space to deliver a genetic payload to patients for gene replacement.
The company has 35 or so products in its portfolio, with roughly 30 of which that are from partners who are burning their own cash to potentially pay REGENXBIO a royalty in the future.
So it’s always great in therapeutics when someone else does the work for you and then you get a reward at the end if it proves successful. The most important partner for many years has been AveXis…which now is owned by Novartis (NYSE: NVS) after the acquisition, can come out of the gate strongly after perhaps May of this year.

REGENXBIO will get 10% of sales presumably, and that could turn REGENXBIO into a profitable company.Profitability is sometimes a metric that some investors use for just screening, so when you have higher demand for stock and more investors are interested, then all things equal, the stock goes up.

Obviously, REGENXBIO can generate a decent amount of royalty income that can be reinvested for growth, such as for furthering its own internal pipeline. REGENXBIO is interesting on another level since the market only models five to seven of its products, so that’s one level.

The second level is that REGENXBIO this year with its wet age-related macular degeneration program could produce data sets that convince people that gene therapy can be used for a mass-market disease.

Years ago, we took the view that you’re going to see initial successes in monogenic diseases, which are rare diseases, generally speaking, related to which patients were basically missing a protein. The gene therapy leads to gene replacement and protein replacement, so it is an easy solution and low-hanging fruit.

But there are diseases like wet age-related macular degeneration where there are literally over a million people in the U.S. and maybe 2 million to 3 million people in the key drug markets of U.S., Europe and Japan, so even capturing a small percentage of the market, as in a very small percent, could lead to a blockbuster since gene therapies are priced upfront for anywhere from five years to 10 years of benefit.

The company can generate a tremendous amount of revenues in an unpartnered way if the wet AMD product starts to show signs of success, which some would argue they have already shown and some would argue they need to show more, but even just a shifting of the market’s probability modestly upward on REGENXBIO can lead to stock performance.

This is because Eylea and Lucentis, the two products that dominate wet AMD and other retinal diseases, generated $10.5 billion in sales last year. If a gene therapy provides five years of Eylea- or Lucentis-like benefit, five times that figure would be over $50 billion for a market opportunity.

These are very vast markets in relation to REGENXBIO’s market cap.

So if the company proves that gene therapy can be used to make a drug that already is known to work, i.e., Lucentis, which is what REGENXBIO is trying to do with its ranibizumab product, then it opens up many mass-market opportunities for gene therapy. That, to me, is a defining product for gene therapy, if it works. So REGENXBIO is also potentially on the verge of history.”

Dr. Gbola Amusa was a firm believer in the potential of Regenxbio for many years.  In this 2018 interview also exclusively in the Wall Street Transcript, the Chardan analyst Dr. Amusa identified several gene therapy companies as potential acquistion targets, including AveXis, which was acquired shortly thereafter by Novartis.

“AveXis, which vastly outperformed as one of our top picks in 2016 and 2017, could file on Phase I data in SMA type 1. We have highlighted AveXis as an M&A target as well, potentially by any of the number of larger-cap players who have shown interest in spinal muscular atrophy.

Regenxbio (NASDAQ:RGNX) is our top pick in gene therapy since it trades at modest valuation, despite roughly 10 partners, including AveXis, and roughly 25 products in development, of which more than 10 are in the clinic. We have highlighted foreign companies that are trading at big discounts to Nasdaq-listed peers with similar fundamentals. These include GenSight (EPA:SIGHT), Lysogene (EPA:LYS), Oxford BioMedica (LON:OXB) and ToolGen (KONEX:199800).

 

Dana Telsey is the CEO of the Telsey Advisory Group (TAG)

Dana Telsey, CEO and Chief Research Officer of Telsey Advisory Group (TAG)

Kimberly Greenberger is a Managing Director in Retail Research for Morgan Stanley

Kimberly Greenberger, Managing Director, Morgan Stanley

 

 

 

 

 

 

 

 

 

Dana Telsey is the CEO and Chief Research Officer of Telsey Advisory Group (TAG). Telsey Advisory Group was founded in 2006 and Telsey Consumer Fund Management LP, an asset management firm, was founded in 2016. Ms. Telsey has followed over 100 companies during her 30-plus year career. From 1994 to 2006, she worked for Bear, Stearns & Co., covering the retail sector as a Senior Managing Director. Earlier, Ms. Telsey was the Retail Analyst at C.J. Lawrence and Vice President of the Baron Asset Fund at Baron Capital. Ms. Telsey was recognized for her leadership in finance by Barron’s, on their list of the 100 Most Influential Women in U.S. Finance on their inaugural list in 2020 and again in 2021.

Kimberly Greenberger, a Managing Director in Retail Research, joined Morgan Stanley in 2010. She focuses on North American specialty apparel and department stores and has covered the apparel industry for nearly two decades. She is also a Chartered Financial Analyst. Ms. Greenberger consistently ranks among the top analysts for coverage of the retail sector in industry surveys from Institutional InvestorThe Wall Street Journal, and others.

These two professional equity analysts recently reviewed the retail stock landscape, exclusively for the Wall Street Transcript, in interviews totalling 5,403 words.

Dana Telsey sees a new era of “supercharged change.”

“It’s been a time of what we call supercharged change. One of the things that happened with the pandemic, a lot of the headwinds that were being discussed over the past few years have really been minimized, and to some extent, eliminated, given the force of the pandemic. The headwinds included: Why go to a store? And now, the essential need for a physical store is greater than ever and integrates seamlessly with digital and creates socialization that consumers crave, and drives conversion…

With the hybrid work model that looks like it will be in place, at least over the next few years, it is going to lead to what will be an always-work-from-home environment. We’re almost seeing more work hours than we would have expected before, because of the reduction in commuting time.

I think the future for the near-term in office may only be two to four days per week, because what we need is that collaboration. We need that culture building. We need the experiences that you get from training in office, from meetings that basically create memories.

The other element of supercharged change is schedules. Given the fact that we can virtually communicate, we are seeing multifunctional activities and placemaking. The home being multifunctional as an office, exercise center and an entertainment center.

And take a look at people’s schedules. We’re seeing schedules where all of a sudden, medical appointments or other activities have more flexible time options, allowing for greater control of one’s schedule. Basically, if you have staff that is more satisfied, they may be more productive workers, also.

The other element of supercharged change would be personal technology. With personal technology, connectivity and speed are essential. The ability to communicate anywhere, anytime is the benefit. And now its use has only increased.

Next, I think of supercharged change being about contactless commerce — contactless payments that are replacing cash given the focus on safety. In addition, buy online, pickup in store, curbside pickup, faster delivery are all other contactless options.

And the last part of supercharged change is a return to nature. The outdoors is providing peace of mind. And, given that it takes 66 days to form new habits, increased outdoor activities may be longer lasting.”

One of the points of change that Dana Telsey reviews is the retail mall experience:

“I think right now what we’re seeing is the greatest strength happens to be open air. Outdoor centers that are grocery anchored are very compelling. And they’re able to get back to sales and/or traffic at or near 2019 levels.

Some of the best enclosed malls also have seen a resurgence in traffic with the increase in vaccinations.

Through socialization, the camaraderie, the ability to engage, they create an experience that is what makes people want to go to stores. Yes, malls are going to change. They’ve been undergoing change. But those very best malls with locations around strong demographic areas — these areas that are growing in terms of the number of people, growing in terms of household incomes — are compelling.

And whether it’s hotels, restaurants, museums, medical, health and wellness, or whether it is co-working, we’re seeing new usages, and new business models going into these malls.

I think the mall of the past isn’t the mall of the future. It may not even be called a mall. Community shopping centers are basically the new term for the future. What helps drive it is community and engagement, along with entertainment that includes the services of food, beverage and restaurants.”

Kimberly Greenberger has also seen a rebound from e-commerce to physical stores:

“…In fact, retailers like TJX (NYSE:TJX)Ross (NASDAQ:ROST)Burlington (NYSE:BURL) that really do not have an e-commerce presence or much presence online, those retailers were actually able to restore their in-store traffic levels to pre-pandemic levels earlier this year.

So not all of the non-essential stores have seen a full recovery in store traffic.

But what we are seeing is that, in general, the retailers have recovered back to 2019 levels of revenue, as a result of either a combination of restored store traffic, as is the case for TJXRoss and Burlington and their U.S. operations, or the combination of a much higher e-commerce business and the store business that is still below 2019 levels.

But on balance, their revenue has recovered to pre-pandemic levels. And I think they’re sitting in very good shape today compared to where they were, let’s say, a year ago.”

The Morgan Stanley Managing Director Kimberly Greenberger sees further improvement for these retailers:

“…In addition, Ross and TJX and Burlington, the retailers who’ve seen the fastest rebound in in-store traffic, they responded very, very quickly to changing buying behavior among consumers.

So consumers, certainly, were not very interested late last year or early this year in purchasing work apparel or suits, or in many cases, special occasion dresses. They were interested in being comfortable, because many of them were working from home.

If they were working out of the home, they really needed to dress very comfortably for the job. And so they adjusted the inventory on hand for those changing preferences.

They also, in many cases, enhanced the offering of home-related merchandise in their stores. Most of us were spending a lot more time at home over the last year and a half than we had previously and we got tired of our interior decoration.

We wanted a bit of change, or we wanted more comfortable chairs or more comfortable desks to work from, or just a few more conveniences at home. And so consumers were buying products to enhance their quality of life at home, more so over the last year than we had seen previously.”

Get the complete picture from these two highly experienced equity analysts by reading both interviews in their entirety, only in the current Retail Report from the Wall Street Transcript.

 

Regina Chi is Vice President and Portfolio Manager for AGF Investments

Regina Chi, Portfolio Manager, AGF Investments

Regina Chi, CFA, is Vice-President and Portfolio Manager at AGF Investments Inc., with lead responsibility for the AGF Emerging Markets strategies. She has an investment philosophy consistent with AGF’s Global Equity Team and looks for quality companies that have long-term sustainable competitive advantages at attractive valuations.

Ms. Chi brings more than 25 years of international equity experience to this role. She was most recently a partner at a boutique U.S. investment firm, where she served as portfolio manager for the Emerging Markets and International Value disciplines.

Regina Chi is a CFA charterholder. She received her Bachelor of Arts in economics and philosophy from Columbia University.

In this 2,425 word interview, exclusively found at the Wall Street Transcript, Regina Chi details her investing philosophy that leads to undiscovered high return stocks in developing markets.

“AGF focuses on investment management services and offers a broad range of investment strategies across the asset class spectrum. I’m on the global fundamental team, and we manage active public equity strategies from global to emerging markets, as well as single countries such as the U.S. I have over 25 years of global equity experience covering developed and emerging countries.

I am the lead portfolio manager of the AGF Emerging Markets Fund. Out of all the asset classes I have managed, I am most passionate about emerging markets — EM — where there is faster GDP growth and an increasing middle-income class dominated by Asia.

EM has the greatest scope for enormous change, predominantly due to digitalization where there is leapfrogging of legacy assets and businesses into the digital world.

The EM asset class is also exciting because it has evolved the most — from being dominated by energy and materials to technology and consumer discretionary…

We actively manage an all-cap, style-neutral global emerging market product.

We maintain a core approach, and we use a combination of quantitative and qualitative analysis for stock selection as well as for country selection. Our key competitive advantage as an EM portfolio manager is that we have dual sources of excess returns.

One is our bottom-up stock-picking focus on quality and strict valuation methodologies, as well as our country allocation framework. We are very focused on owning high-quality companies that consistently earn a rate of return above their cost of capital and have attractive valuations and a fundamental catalyst.

I took over the Fund on January 1, 2018, and overall, the performance has been very solid.

The fund is a core strategy with growth and value stocks, and benchmark agnostic and style neutral.

Our turnover is quite low, less than 40% because we have a long-term time horizon.

From a regional perspective, we are overweight Eastern Europe and Latin America and underweight Asia.

As of the second quarter of this year, we maintain a slight underweight to China and Hong Kong.

We are overweight India, South Africa and Brazil. Our sector weightings are a byproduct of our bottom-up stock selection. So rather we focus on country allocation and bottom-up stock picking.”

Regina Chi has taken a somewhat contrarian view on the India stock market:

India has had one of the worst COVID surges over the past couple of months, and it really has knocked growth prospects. However, what’s clear is that the impact to the economy from the second wave was considerably smaller compared to the first wave, which was the summer of 2020.

What’s different this time is that the Indian firms have been able to learn to live with the virus.

With the vaccination supplies improving, the economic outlook is actually getting better. The central bank remains very accommodative. What we like about India is that you have over 1.3 billion people, where growth is among the highest in the world, besides China.

We can find a plethora of long-term, high-quality companies there.

For example, we like Varun Beverages (NSE:VBL) which is the largest PepsiCo (NASDAQ:PEP) bottler in India. This company has been able to show an exceptional track record in tripling their business over five years as they have been able to acquire more territories within India and diversify outside of carbonated drinks into juices and coffee.

We expect Varun Beverages to continue to have strong topline growth and margin expansion.”

One of Regina Chi’s current picks has an exposure both to the China economy and the green technology:

“Most of my high-conviction names are not listed in the United States. This is why being an EM-specific manager gives us a differentiated advantage, because we can find the stocks that are not available to U.S. investors.

For example, one of my highest-conviction names is NARI Tech (SHA:600406), which is an A-share listed Chinese company. China has gone through their own investment cycle and the current U.S.-China trade war will persist. We are focused on domestic-oriented companies like NARI Tech.

Given China’s push to being carbon neutral by 2060, there is a greater need for electrification of the grid to onboard renewable energy sources, and NARI Tech is one of the biggest beneficiaries. They are a dominant manufacturer of secondary equipment for the state grid, and more of its software and related hardware products will be needed to manage the stability of the power grid as they onboard more renewable energy sources like wind and solar.”

Regina Chi also finds value in the turmoil of South Africa:

“Yes, one of the tailwinds we are seeing is the higher commodity prices that benefit some emerging countries, especially the commodity-rich ones.

These include South Africa, Brazil, and the Mideast where there are a lot of mining and material companies, as well as energy stocks.

We remain positive on these sectors, particularly in South Africa where we are holders of Anglo American (OTCMKTS:NGLOY). They are a diversified miner with exposure to precious metals, base metals, iron ore and diamonds.

South Africa has been interesting this year as the country’s stock market has performed well amidst a backdrop of rising global bond yields, resurgence of the coronavirus and low vaccination rates.

I credit this to the fact that the higher commodity prices allowed their external balances to be very strong. This time versus the taper tantrum in 2013, South Africa has current account surplus, and the South African rand actually appreciated as bond yields rose.”

Get the complete picture by reading the entire 2,425 word interview with Regina Chi of AGF Investments, exclusively in the Wall Street Transcript.

Regina Chi, CFA, Vice-President & Portfolio Manager

AGF Investments Inc.

www.agf.com

Paul Lambert is the portfolio manager of the Tocqueville Opportunity Fund

Paul Lambert, Portfolio Manager, Tocqueville Asset Management

Paul Lambert, CFA, is a Portfolio Manager at Tocqueville Asset Management L.P. Mr. Lambert is the Portfolio Manager of the Tocqueville Opportunity Fund and for several private wealth clients of the firm. He also provides research support for the U.S. Multi Cap Equity Strategy at Tocqueville Asset Management.

Prior to joining Tocqueville in 2010, Mr. Lambert served as a securities analyst at Key Bank where he worked within their Asset Recovery Group helping middle-market companies to restructure their debt. Mr. Lambert received his A.A. from Dean College in 2005 and a B.S. from Babson College in 2007.

In the extensive and wide ranging 2,144 word interview, exclusively in the Wall Street Transcript, Paul Lambert of the Tocqueville Opportunity Fund details his current and future stock buying plans.

“The Tocqueville Opportunity Fund (MUTF:TOPPX) focuses on small- and medium-sized U.S. companies that exhibit clearly defined sustainable competitive advantages tied to secular growth opportunities.

These companies typically offer a disruptive technology that makes their customers more productive and efficient or have a product or service that is extremely difficult to replicate. Our sector ratings are, as of today, 60% in technology, 17% in health care, 12% in industrials and 5% in consumer discretionary.

I have been working on the fund for about 10 years now and took over as lead Portfolio Manager within the last three years.”

The Tocqueville Opportunity Fund portfolio is maintaining it’s large tech stock positions:

“The revenue model of the companies that assist in digital transformation are recurring-revenue, subscription-based businesses. They are getting very predictable revenues with low churn rates and high gross margins — typically 80%-plus — which allows for rapid reinvestment of capital for new product development and cross-sell of existing products.

We are very bullish on technology as we sit here today and believe we are in the early innings of the digital transformation theme.”

This leads to the Tocqueville Opportunity Fund (MUTF:TOPPX) top picks:

“Our biggest position remains Shopify (NYSE:SHOP), which was our biggest position pre-pandemic. And it is our biggest position post-pandemic.

We could not be more bullish about the company’s prospects. Early on, when all the lockdown restrictions went into place as a result of the pandemic, brick-and-mortar retailers that were without online capabilities were basically out of business.

As a result, they were turning to companies like Shopify to, at the very least, get an online store and take payments. Shopify saw its merchant count double in 2020 from about a million merchants to roughly 2 million.

Part of the allure and genius of Shopify is its open architecture platform, which enables a robust developer network and more choices for merchants. On the sales side, Shopify has partnered with some of the biggest retailers and social media companies including Facebook/Instagram (NASDAQ:FB)Pinterest (NYSE:PINS), Walmart (NYSE:WMT) and Google (NASDAQ:GOOG).

This makes it easier for Shopify merchants to reach more end consumers through an integrated offering that enables online consumers to transact on a Shopify store seamlessly. We believe this is a very important development and only deepens Shopify’s moat versus other competitors.

Despite these positive developments, Shopify has been very aggressive reinvesting capital in areas like logistics, Shopify Capital to help their merchants grow faster, and they are investing in marketing.

They are doing all these things to help their end merchant transact more through the platform. And the more commerce that goes through the Shopify platform, the more Shopify and its shareholders benefit because they get a requisite take rate.

The secular growth theme of ecommerce is accelerating. Today, approximately 20% of worldwide retail sales happens online and we expect that to increase considerably as consumers have gotten more comfortable transacting online.”

The recurring revenue model is found in another top holding of the Tocqueville Opportunity Fund (MUTF:TOPPX):

“ServiceNow (NYSE:NOW) is our second-largest position. It is one of the preeminent enterprise software providers as it functions as a platform of platforms that sits on top of an enterprise tech stack.

It enables digital workflows to be done faster and quicker through its low code products. NOW’s software offering can sit on top of all the legacy software applications and can integrate with them. As businesses embark on their digital transformation, enterprises are using the NOW platform to facilitate digital workflows and expedite time-intensive tasks.

The company has shown impressive growth, compounding revenues at 35% for the last five years.

They are projected to do about $5.5 billion in revenues in 2021 with a 30% free cash flow margin, which is one of the best combinations of growth and profitability in software. We continue to be very bullish on the company as its opportunity set continues to grow.

Management estimates its total addressable market at roughly 160 billion. This includes its products in areas such as IT service management, IT operations management, customer service management, and human resources.

Eighty-five percent of the Fortune 500 are already customers and NOW has a retention rate of over 95%, so clearly large enterprises are seeing the positive impacts of the NOW platform. We believe the company is in the very early innings of upselling and cross-selling its enterprise install base, which could expand FCF margins even further as cross-selling is the most capital efficient way to grow revenues.”

Even in other sectors the Tocqueville Opportunity Fund (MUTF:TOPPX) likes to keep focus on the recurring revenue model:

“Within industrials we have been selective. One of the sectors we continue to be bullish on is housing. We think the steady migration out of urban areas will continue and that has put upward pressure on housing prices.

Homeowners have more home equity and are reinvesting back into their homes as work from home is likely a trend that will persist for some time. The way we have approached the sector is somewhat like the technology sector insofar as targeting companies with recurring or maintenance revenues.

Pool Corp (NASDAQ:POOL) and SiteOne Landscape (NYSE:SITE) are examples.

Both have large maintenance components to their revenue base, north of 50%. Pool Corp is a name we have owned for a long time. They are a wholesale distributor of swimming pool supplies, equipment and related leisure products.

Sixty percent of their revenue base is maintenance; pools require constant attention — from chlorine to keep the right pH levels to pumps to keep the water fresh and circulating.

These types of expenditures cannot be delayed or ignored, which has manifested in very sustainable revenue growth and high ROIC. We remain positive on the company as homeowners have been electing to construct pools, which requires these maintenance purchases.

SiteOne Landscape Supply is one the largest distributors of commercial and residential landscape supplies…”

Get the complete detail on the 2021 top picks from the Tocqueville Opportunity Fund (MUTF:TOPPX) by reading the entire

Paul Lambert, CFA, Portfolio Manager

Tocqueville Asset Management L.P.

www.tocqueville.com

Richard Bove is the Chief Financial Strategist for Odeon Capital Group

Richard X. Bove, Chief Financial Strategist, Odeon Capital

Kevin O’Connor is the Chief Executive Officer of New York’s Dime Community Bank

Kevin O’Connor, CEO, Dime Community Bank (NASDAQ:DCOM)

 

 

 

 

 

 

 

 

 

 

 

Richard Xavier Bove is Chief Financial Strategist for Odeon Capital Group LLC. Mr. Bove began his career on Wall Street as a retail salesperson at legacy Eastman Dillon Union Securities in late 1965.

He joined Wertheim & Co. in 1971 as an analyst covering the building and banking industries. Later, Mr. Bove became the Director of Research at C.J. Lawrence and Raymond James. In the mid-1980s, he returned to the analytical profession as a banking and financial analyst serving at Raymond James, Dean Witter Reynolds, Lehman Brothers and Ladenburg Thalmann, among other firms in his 56 years in the industry.

In 2013, Mr. Bove joined Rafferty Capital Markets. In 2018, he was selected to be the firm’s Chief Financial Strategist, after which time he was named to the role for Odeon.

Mr. Bove has been interviewed on television over 1,600 times and his print interviews now number over 10,000. His views have been reported on in Europe, Asia and Latin America. He holds a bachelor’s degree from Columbia College where he graduated in 1962. He has been married 55 years and has seven children and 19 grandchildren.

In his 6,505 word interview, exclusively in the Wall Street Transcript, Richard Bove details his current take on the US banking sector.

Kevin O’Connor has been the Chief Executive Officer of New York’s Dime Community Bank since 2020.

Earlier, he was CEO of BNB Bank, and had senior roles at North Fork Bank. Mr. O’Connor has been on the boards of Pursuit, the New York State Bankers Association, the Hauppauge Industrial Association, the Long Island Association, as well as the Brooklyn Chamber of Commerce.

He is also a member of the Board of Trustees of Suffolk County Community College. He received accounting degrees from Suffolk Community College and Adelphi University.

In his 3,111 word interview, exclusively in the Wall Street Transcript, Mr. O’Connor details his vision for increasing shareholder wealth for investors in his company, Dime Community Bank.

Kevin O’Connor has managed to put together a community bank merger in the midst of the COVID 19 global pandemic:

“Dime Community Bank is the result of a recent merger that we announced a year ago and closed on February 1, 2021, between the former BNB Bank and Dime Community Bank. It was a merger of equals.

I had been the CEO and President of BNB Bank and we had been operating over 100 years. Dime was about 150 years old.

We created the headquarters in Hauppauge for the new Dime, strategically positioned with about $13 billion of assets today and $1 billion in capital. And I’ll just say legacy BNB had a deep history in C&I — commercial and industrial — commercial real estate, and small business lending, while legacy Dime had been a leading player in New York multifamily lending.

We had a strong market share and brand awareness on Long Island. Dime’s footprint was primarily in the boroughs, Brooklyn, Queens, with some presence in Manhattan.

We have now created a strong community bank, operating truly from Montauk to Manhattan with specialty in business banking, commercial real estate and multifamily lending.

We have a unique footprint in our marketplace.

If you take the geographical footprint of Long Island, we would be the 14th largest state in the country including Nassau, Suffolk, Brooklyn and Queens.”

Kevin O’Connor takes his role as Dime Community Bank leader quite seriously:

“I think, for our employees, when it was very dark and health care workers and frontline workers were saving lives, it gave us a chance to actually make a difference.

In fact, one of the accounting firms that had clients with many of the larger banks got frustrated they were not getting answers, and came to us. And we probably got loans for 35 of their customers. And one of their customers made trophies, and they actually made a gift for us that we have displayed in our lobby here to thank us for helping all of these customers get these PPP loans when other banks failed.

I was at an event the other day where there was a not-for-profit that had been struggling to get their PPP loan done with larger banks — they were just overwhelmed. And we were able to get that done, and we were recognized for this.

I think the community banks and our bank, in particular, really stepped up. Our employees live in the communities where they work, in many cases, and they knew the customers that were struggling. And we’re there to help reach out and help them navigate what was going on.

Now, we still sit here today. People’s financial statements are still somewhat affected by what happened. And we’re making sure that as we look at their loans and renew their loans, we’re understanding the impacts of the pandemic and how they may have affected your financials.

If the fundamentals of your business are still strong, we’re going to be lending to you going forward.”

This focus on servicing the community has Dime Community Bank at a disadvantage, according to Richard Bove, a long term veteran of the US banking sector:

“Let me dispute the Jeffersonian argument which suggests that small banks and personal service creates the ideal banking system. My view is that there is no place for small banks in the United States because they cannot provide the consumer with the best financial deal.

In other words, the business model simply is no good.

When I started following banks, there were 14,500 of them. Today, there are about 4,900 of them. You have to ask yourself: Did someone with a machine gun come from Bank of America (NYSE:BAC) and enter into Joe Jones’ bank and say, “Close down or we’re going to blow this place up?” No. Joe Jones’s bank went out of business because it had a business model that was no good.

It was taking in money at variable cost and putting it out at a fixed cost. Next, small banks have limited product offerings. Third, small banks are relatively high cost in nature. They lack technology, scale, and are too labor intensive. Fourth, they do not have the money to buy the technology that would allow them to reduce their costs. Moreover, if they bought the technology, they don’t have enough business validate making the expenditure.

JPMorgan Chase (NYSE:JPM) is America’s largest bank. It is in this position because it can offer its customers — among which I am one — more products with greater utility faster and at lower price.

They offer the consumer a better deal and for that reason they are growing their market share. Bank of America is the nation’s second-largest bank, they have attracted tens of thousands of clients who do all of their banking on mechanical devices. Small banks cannot match that.

So the small banks continue to fold up and go away. An estimated 10,000 of them have gone in my career. You cannot get rid of 10,000 more, because there’s only 4,900 left. Unfortunately, they are done.”

Get the full picture on the US banking sector from the new Wall Street Transcript Banks Report, exclusively at TWST.com.

Fifth Third Bancorp (NASDAQ:FITB)

Fifth Third Bancorp (NASDAQ:FITB) is First with Two Banking Analysts

Fifth Third Bancorp (NASDAQ:FITB), based in Cincinnati, Ohio has $205 billion in assets and operates 1,096 full-service Banking Centers, and 2,369 Fifth Third branded ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia, North Carolina and South Carolina.

Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Wealth & Asset Management. Fifth Third is among the largest money managers in the Midwest with $483 billion in assets under management.

In this issue of the Wall Street Transcript, two top banking analysts picked FITB as one of their banking winners for 2021 and 2022 stock appreciation.

Peter Winter is a Managing Director at Wedbush Securities. He covers regional and Texas banks. He has 19 years of sell-side experience with CIBC World Markets, BMO Capital Markets and most recently, Sterne Agee CRT.

He was ranked first in earning estimate accuracy in 2019, 2018 and 2017 and third in 2016 and 2015 by Starmine. He is a graduate of Syracuse University.

In his 2,007 word interview, exclusively in this week’s issue of the Wall Street Transcript, Peter Winter bangs the table for FITB investors:

“Fifth Third Bancorp (NASDAQ:FITB) is a well-run company. It’s another Ohio-based bank. They’ve got an expense initiative in place. They’ve done an incredible job to hedge the interest rate environment for a long period of time with rates being low. That’s helped support the net interest margin.

They’ve been very disciplined on waiting for higher rates to invest all its excess liquidity into either loan growth or security. So there’s a lot of dry powder sitting on the balance sheet — $30 billion in excess liquidity, earning 15 basis points. That would be a real earnings leverage when they put that money to work.

They’ve got capital ratios that are above their targeted levels, so they’ll be aggressive with buying back stock. They’re going to increase the dividend in the third quarter. It’s a great story with the way that they’ve positioned the balance sheet, capital, and they’ve got dry powder for earnings growth along with an expense initiative.”

Peter Winter has been a long term advocate of the stock, suggesting investors put their money to work there in this 2019 2,406 word interview, where he stated that:

“They have some earnings levers that other banks don’t have to generate above average EPS growth. There will be costs savings from the integration of its pending acquisition of MB Financial (NASDAQ:MBFI), expected to close in the first quarter. …they de-risked the loan portfolio and exited $5 billion in loans, setting the stage for stronger loan growth in 2019.

They provided 2019 average loan guidance of 3.5% versus 1.2% in 2018. They have levers on the expense side, excluding the acquisition, where they are projecting 1% or less expense growth in 2019.”

Christopher Marinac is Director of Research at Janney Montgomery Scott. Mr. Marinac oversees the firm’s Equity Research team, which covers more than 225 companies within the financials, health care, infrastructure, and real estate sectors. Mr. Marinac has more than 27 years of financial services and research analysis experience.

Prior to joining Janney in 2019, he was Co-Founder and Director of Research at FIG Partners LLC, a premier investment banking and research firm specializing in community banks. At FIG, he established and managed an award-winning Equity Research team that covered more than 150 banks, thrifts, and REITs.

Earlier in his career, he spent six years as Managing Director at SunTrust Robinson Humphrey and five years as a Research Analyst at Wachovia Corporation (formerly Interstate/Johnson Lane Inc.).

He has served as a financial expert and resource to global and national media outlets including American Banker, Bloomberg, CNBC, Financial Times, FOX Business, and The Wall Street Journal. Mr. Marinac graduated from Kent State University with a Bachelor of Science in Accounting and Finance.

He is actively involved with Atlanta Ronald McDonald House Charities, where he is serving his fourth three-year term as a board member.

In his 4,851 word interview in this issue of the Wall Street Transcript, Chris Marinac sees tons of investor upside in FITB:

“From the large-cap perspective, a company that I think is not fully appreciated is Fifth Third (NASDAQ:FITB). We have a “buy” rating and feel that Fifth Third has a lot of untapped earnings, primarily because they can put their excess cash to work in higher loans and higher-earning assets. The company is going to be very thoughtful about being a bigger lender in both the consumer and commercial channels. They will most likely do more consumers sooner.

There’s an opportunity for Fifth Third stock to continue to trade higher.

They are going to be pretty active in share buybacks. They told us that, but I think that’ll play out for them as well. So the stock has certainly done well in the big picture. There is more upside and a bigger valuation still ahead for the company. Also, just like I mentioned in that whole group, there is an opportunity for the Fifth Third to have a higher earnings estimate, which therefore helps the stock price to go higher from here.

TWST: When you mentioned untapped earnings, what do you mean exactly there?

Mr. Marinac: That there is excess cash. Cash and securities are a large part of the balance sheet right now. We think that can be higher or can be utilized in the higher earnings. That is the main point. The other point that rings true is that, in the case of Fifth Third, the share count was going to come down, so that the share repurchases are going to cause a lower share count, which therefore means higher EPS numbers.”

These strong affirmations of Fifth Third Bancorp (NASDAQ:FITB) are available exclusively in the Banks Report from the Wall Street Transcript.

Previous reports advocating Fifth Third Bancorp (NASDAQ:FITB) investments are available including this 3,768 word interview from Portfolio Manager Barry James:  “Fifth Third…is a national bank, but its focus is more in the Midwest, to be honest. That seems to be one of the areas that is coming back in pretty good order.

It is strong financially and has the ability to take advantage of the rising interest rates to boost the bottom line. We don’t like to see too much heavy overhead in the business so that they can take pretty swift advantage of the improving economy that we see.”

Matthew Lilling is the Portfolio Manager and Managing Director at ClearBridge Investments

Matthew Lilling, Portfolio Manager & Managing Director, ClearBridge Investments

Matthew Lilling, CFA, is a Portfolio Manager and Managing Director at ClearBridge Investments.

He co-manages the Mid Cap, Mid Cap Growth, and SMID Cap Growth portfolios.

He began at ClearBridge in 2010 and has 15 years of investment industry experience. Earlier, he was a Private Equity and M&A Advisory Associate at MTS Health Partners and an Investment Banking Analyst at Lehman Brothers.

He received an MBA from Columbia Business School and holds a B.A. degree in economics from Emory University.

In this 2,734 word interview, exclusively at the Wall Street Transcript, Mr. Lilling details some of his top picks and his underlying research for investors.

“One company we hold is Chewy (NYSE:CHWY).

Chewy is a company we’ve been invested in since the IPO. It sells pet foods, products and prescription drugs online to pet owners. It can deliver them in one to two days. It is a digitally advantaged company that has a business model that benefited from the pandemic, as customers shifted purchases online.

It has also benefited from the increasing number of pet owners. This caused revenue to accelerate significantly in the summer of 2020 and we saw Chewy’s stock price quadruple from pre-pandemic levels. Chewy gave back some of those gains in early 2021 as growth stocks moved out of favor.

But when looking closely at the fundamentals, there’s still a lot to like. First, the majority of their products are consumables, so the customers they gained during the pandemic will keep coming back. And secondly, the new customers typically utilize more of the products that they sell.

So Chewy has this large recurring customer base and they can grow it by offering new services, like prescription drugs and higher-margin private-label products.

It looks like Chewy is now returning to pre-pandemic growth levels, but just off of a higher base, along with better customer economics and profits, and that all makes a strong argument for a sustained higher multiple.

Do we know if those types of companies are going to be in favor over the next six months? No. But we do think that Chewy can be a much bigger and better and more valuable company over the next three to five years.

Matthew Lilling has another top pick for investors in 2021:

“I’ll mention a company that has benefited more in the last six months.

Regal Beloit (NYSE:RBC) is a company that has benefited from the cyclical recovery of the economy, but one that we still feel has a lot of opportunities, mainly from internal optimization efforts under a new management team.

Regal sells electric motors into commercial and residential HVAC companies as well as those that make pool heaters and industrial power transmission equipment. And under the mismanagement of the prior CEO, this was a decade-long value trap.

It had low multiples, but there was never any reason for that to change.

When we started researching it last summer, we saw a company with pretty high market share, rational competition, and the ability to pass along price increases to cover commodity inflation. Those are pretty sound fundamentals.

But it also had returns on invested capital from only 4% to 8% over the last decade. When new management arrived in 2019, they laid out long-term targets to improve margins, organic growth and returns using a plan called the 80/20 plan.

They wanted to do simple things like decentralize profit and loss, or P&L, through regional and plant managers, rationalize its manufacturing footprint, get rid of unprofitable products, ask unprofitable customers for better pricing, and improve cash collections.

The prior management team was focused on projects that didn’t have payback to them. And the new management team is doing things like having the research and development team talk with the sales team to make sure that capital is being allocated correctly.

These aren’t complicated things to fix. And there’s a company-specific opportunity to improve margins, returns and growth. And so, even though this is a company that’s done really well over the last six months, there’s still a lot of room to move returns higher as the company executes on its internal strategy.

…especially in Regal’s electric motor product sets, where improvements in energy efficiency can have large impacts on improving environmental outcomes.

So as Regal invests in new products, the impact of residential and commercial HVAC systems on the environment is reduced.

I would also add that it’s important to understand what their customers are looking for, and what they need, and what their goals are for their products that they’re releasing to the end markets in order to adequately match the R&D spending and allocation to what the customer actually needs.

And that way, they’re being more efficient with their spend.”

A used car company is also at the top of Matthew Lilling’s stock pick list:

“Going back to another digitally advantaged company, Carvana (NYSE:CVNA) is an example of a company that benefited massively from the pandemic.

The stock, similar to Chewy, worked well throughout the summer of 2020, and has been range-bound since. When looking forward here, though, they still have a huge market to disrupt.

Carvana sells used cars online. This is another company that we’ve been invested in since the IPO, and is a good example of a company with a huge addressable market.

It has less than 1% market share, even after they’ve grown greater than 100% for three of the last four years. Customers were getting more comfortable buying big ticket items online, like used cars, prior to the pandemic and the pandemic accelerated that even further.

To be clear, this isn’t a pull forward in demand that’s going to create tough comparisons. It’s more of an acceleration in penetration into a massive growth market.

People are not going to go back to doing things the old ways, once they’ve seen how much of a better process this is.

In addition to continuing to penetrate the used car market online, Carvana has adjacent opportunities that they’re not currently taking advantage of. There may be opportunities to sell maintenance contracts or insurance to car buyers in the checkout process, as well as a call option on how new cars are eventually distributed in the future.

Carvana also has sustainable competitive advantages from building out reconditioning centers and infrastructure to distribute these vehicles. These are actions that are not easily duplicated by others.

My co-portfolio manager, Brian Angerame, has been an investor in the used car space for over 15 years, and provided a lot of the analytical power behind this one.”

Get all the top picks from Matthew Lilling by reading the complete 2,734 word interview, exclusively at the Wall Street Transcript.

Matthew Lilling, CFA, Portfolio Manager & Managing Director

ClearBridge Investments

email: info@clearbridge.com

Raymond Saleeby is President of Saleeby & Associates

Raymond Saleeby, President, Saleeby & Associates

Raymond Saleeby is President of Saleeby & Associates, Inc. He has over 38 years of investment experience. He formed Saleeby & Associates in April 2001.

In this 3,228 word interview, exclusively in the Wall Street Transcript, Raymond Saleeby details his investing philosophy and has many top picks to recommend to investors:

“There is always a good time to be contrarian. It’s a question of how many stocks are available to you. But it’s obvious with stocks hitting new highs, it’s harder to find contrarian stocks. But like anything else, there’s many opportunities, not just in this market but overseas as well…

I’ve followed many, many over a period of 38 years that I’ve been managing money. And I used to be, in the 1980s and 1990s, heavily involved in the water business. I thought that was the best business in the world for 30 years.

And I still think it’s a very good business, anything tied to it, whether it be water utilities or water service companies that service different pumps and the like. It’s just a great business. And I made a lot of money, but it was discovered in the last 10 years with the price/earnings ratios and the multiples increasing dramatically. So I’ve shied away from it.

I think the next best business that I found in the last five years — it’s a phenomenal business — is the flavor and fragrance business. It’s termed different names in different areas. But it’s a great business.

The same companies have been around, for the most part, the last 100 years, and the barriers to entry are enormous. It’s a sticky relationship. And it’s a nice business which you want to buy today in an environment where we’re going to have higher inflation.

And as you see higher inflation, your profit margins start to squeeze somewhat with higher material costs, higher labor costs. But you want to buy businesses where you can increase your prices where the customer is not going to jump ship just because you increase your prices to go to another competitor. And that’s why I say it’s a very good business — being the sticky business…

…it absolutely also includes beverages, drinks, foods, better ways to take sugar out of things — it’s basically healthy. It’s a good business during bad times and good times and it’s a business that’s not necessarily mostly American.

For the most part, it’s more European. It’s a business that offers phenomenal future opportunities with developments of new foods.

They’re healthier for you and more natural. Natural ingredients is a buzzword today in any business.”

Raymond Saleeby has some specific names in this sector:

“A business that has done very well that is heavily involved with millennials is the spice business. And you’re absolutely right.

They love spices.

McCormick (NYSE:MKC) has done very well over the years. It’s a company I bought many years ago.

And I’m not recommending it necessarily today, but they have red hot sauces, and those things are booming right now.

The millennials like that. And you’re absolutely right. Many people are looking for different things for food to add flavor that are not necessarily the traditional ones of salt, fat and sugar.”

Another sector that is catching Raymond Saleeby’s interest is real estate:

“Housing — I wrote a special report about it in the last newsletter and did an in-depth analysis. Basically, there’s a shortage of housing right now, and you have several factors affecting that.

One is older people who typically supply a lot of homes to the market for the younger people and next generation — they are staying in their homes longer, remodeling them.

They were afraid of COVID, because it felt like it was a death sentence to go to a nursing home last year. So that’s changing the supply dynamics.

Secondly, you’re finding that costs of lumber are increasing with other raw materials, dramatically in the last year, up 300% to 400% off the lows.

And you can’t find enough labor because a lot of people quit the profession since 2008 when you had the last housing bubble.

But right now, you have more housing affordability from an interest rate perspective than you’ve ever had before. And you also have other institutions like private equity out there and publicly traded corporations that are competing against you to buy a $300,000 or $400,000 house, which makes sense to do that because you can get the rental income to offset it and some growth behind the value of the house itself.

It makes a nice return. So they’re competing.

It’s very difficult for the average person to buy a house today in a hot market, especially because these are cash buyers. You’re seeing many, many overbids right now.

Thirdly, what’s changed housing more than anything else in the last 10 years, I think, is people buying it without seeing the house. And you’ve got such great graphics with Zillow (NASDAQ:ZG) and Redfin (NASDAQ:RDFN) and the like, that people can see what a house looks like.

You can see it in 3D as well. You can find so much more information that before was only for the real estate broker. It’s the same thing happening in our business, the financial business.

The consumer and the client are beginning to be so much more informed than ever been before. It’s mind-boggling how much information they can receive today. And they can receive it accurately and fast.”

Raymond Saleeby has a specific recommendation for investors:

“I think people need to take the Warren Buffett approach. If I were to tell people one thing it is go back and read everything you can about Warren Buffett. He may be the greatest investor of all time.

He shares some of his secrets.

And I followed him for my whole career and I’ve learned an incredible amount from him. His investment advice has been spot on, and he’s a genius. And we’re very fortunate to have him in our lives right now.”

To get all of Raymond Saleeby’s top picks, read the entire 3,228 word interview, exclusively in the Wall Street Transcript.

Raymond Saleeby, President, Saleeby & Associates, Inc.

(314) 997-7486

email: rsaleeby@cutterco.com

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