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Disnat GPS Report – US Portfolio

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Below is a table summarizing the valuation of our US Portfolio securities using Disnat GPS's four main criteria – financial health, growth, governance and valuation – key financial ratios, and a short commentary on the current position of Disnat GPS with regard to each of these stocks.

Company Name Price (April 30 2018) Financial Health Growth Governance Valuation Price/Earnings Ratio Future Price/Earnings Ratio Price/Earnings Ratio (5 Year Average) Dividend
Alphabet (GOOG-U) $1,017.33 Excellent Excellent Excellent Concerning 43.1 23.1 n.a. 0%
Apple (AAPL-U) $165.26 Excellent Excellent Excellent Excellent 17.0 14.9 14.1 1.5%
AT&T (T-U) $32.70 Concerning Reasonable Excellent Excellent 6.9 9.5 21.2 6.1%
BlackRock (BLK-U) $521.25 Excellent Reasonable Excellent Reasonable 17.3 18.4 18.7 2.0%
Walt Disney (DIS-U) $100.33 Reasonable Reasonable Excellent Excellent 14.2 14.3 20.2 1.6%
Facebook (FB-U) $172.00 Excellent Excellent Reasonable Excellent 28.5 22.5 374.0 0%
Johnson & Johnson (JNJ-U) $126.49 Excellent Reasonable Excellent Reasonable 269.1 15.6 20.2 2.7%
McDonald's (MCD-U) $167.44 Reasonable Reasonable Excellent Concerning 26.3 22.0 21.3 2.3%
Microsoft (MSFT-U) $93.52 Excellent Excellent Excellent Reasonable 63.2 23.1 23.8 1.7%
Nike (NKE-U) $68.39 Excellent Excellent Excellent Reasonable 63.3 26.0 26.4 1.1%
Skechers (SKX-U) $28.50 Excellent Excellent Concerning Excellent 25.0 13.3 33.2 0%
TJX Companies (TJX-U) $84.85 Reasonable Reasonable Excellent Excellent 21.0 17.5 21.1 1.5%
In addition to being very satisfied with the financial situation of this company (no debt and a cash on hand of $100 billion) and its current growth (Google search engine), Alphabet stands out in research and development related to sectors of the future like cloud computing, artificial intelligence and autonomous vehicles. With this in mind, this company is one of the best ways to take advantage of anticipated technological changes and is therefore an excellent investment for many years to come.
Although this company is very dependent on sales of the iPhone (which accounts for about 66% of sales), recent developments in the services sector and the latest investments in autonomous cars and artificial intelligence should allow the company to better diversify. Apple also enjoys great financial flexibility because of its cash position, which is now very high.
The Department of Justice is trying to prevent AT&T from acquiring Time Warner. We believe that, no matter what the result of this opposition, AT&T stock should come out stronger. It does not matter whether the company buys Time Warner or remains a traditional telecommunications company: in our opinion and in either case, removal of the "uncertainty " surrounding this company will benefit its stock.
For many investors, BlackRock has been synonymous with iShares! However, in addition to its dominant position in the field of index products and passive management, this company offers a range of the most complete managed products. BlackRock is particularly well positioned to continue to benefit from this distinction; its reputation and the breadth and diversity of its services (it has clients in over 100 countries) make it a dominant player that is virtually inimitable.
We are aware of the risks associated with massive cord cutting of cable and traditional TV. However, changing the distribution mode does not prevent people from wanting more live sports, more TVs and more movies than ever before; in a word, more "content ". And that's exactly what Disney offers. In addition, the company's willingness to distribute its content directly (like the recently announced ESPN subscription) seems to us to be a good strategy, given its situation. We are also pleased with past acquisitions (Pixar, Marvel and Lucasfilm) and FOX products, which should continue to help the company diversify.
Despite recent privacy concerns, Facebook remains by far the leader in social media. We believe that in the medium to long term, these setbacks will have little effect on the company, and that its dominant position will continue to allow it to reap huge profits.
Johnson & Johnson occupies a dominant position in most markets where it is active. Companies of this kind (quasi-monopolies, oligopolies, etc.) are particularly well placed to take advantage of economic strength. Their connection to the health sector often allows them to withstand hard times when economic conditions are difficult. With this in mind, Johnson & Johnson stock seems attractive to us in most of the anticipated scenarios, and we plan to keep our shares for the medium and long term.
McDonald's has made major changes in recent years. All-day breakfasts, order kiosks, the mobile order application and delivery should continue to support the growth of sales and profits of this company. We believe these changes will be made to the entire network and will continue to drive McDonald's profits for a long time to come.
The company continues its transition and continues to focus its development on cloud computing. As this fantastic sector of the future inspires us with great confidence and as Microsoft can continue to rely on its good relations with its many clients for several decades to boost its business, we believe that this transition will be a success and that the company, which is already one of the three main players in cloud computing, will continue to position itself as an essential part of this sector.
Founded in 1967, Nike turned 50 in 2017. Disnat GPS acquired Nike for less than $51 in November 2016, while the company and the stock market were going through a tough time. The resumption of growth (especially in North America) should continue to help it. This stock appeared to be heavily undervalued when it was acquired and is now trading at a price closer to its real value. Although this is no longer a great deal, Nike continues to be a top-notch company whose stock is selling at a fair price.
Recent results from Skechers, in our opinion very reasonable, have been badly received by the market, so that the stock lost 25% of its value since the publication of these figures. With this in mind, this company's stock now seems to us to be particularly undervalued; so we plan to keep this position and may even increase it.
Although overall retail trade is weakened by the expansion of online commerce, we believe that this company, which owns Winners, Marshalls and Home Sense, is relatively well protected. The business model of selling end-of-line premium branded products at a low price is, in our view, a "niche " that should continue to attract bargain hunters and those who continue to love the traditional shopping industry.

Warning

This Disnat GPS report is presented for general information purposes only. Desjardins Group, Desjardins Online Brokerage and Disnat GPS assume no responsibility for any errors or omissions and reserve the right to change or revise the contents of this report at any time without notice.

Financial and economic data, including stock quotes, analyses and interpretations thereof, is provided for informational purposes only and should in no way be regarded as a recommendation or advice to buy or sell any security or derivative.

It is possible that Desjardins or Desjardins Securities have already published differing or even contrary opinions to what is expressed herein. These views reflect the different views, assumptions and portfolio analysis methods of the analyst who provided them.

Desjardins Online Brokerage, its directors, officers, employees and agents will not be held liable for damages, losses or expenses incurred as a result of the use of information contained in this report.

All data are from Morningstar (©Morningstar).

The author

Steve Deschesnes

Steve Deschesnes

Disnat GPS Portfolio Strategist