Author: padlock

The following is an expanded version of my post-Market Call Tonight appearance write-up that will appear in the online version of the Report on Business on April 11, 2014. Market Overview In spite of the recent volatility in the equity markets, Padlock remains constructive for the balance of the year. After a very strong year last year for equities, investors should expect more muted but positive returns for the balance of the year. Valuations remain favourable, as do monetary conditions. It may be five years from the market bottom but overall equity market conditions do not suggest a market top but rather the continuation of a long term secular bull market. These views will be expanded in the Spring Quarterly issue of The Lato Letter that will be sent out next week. Apple Inc. (AAPL-NASDAQ, $523.48) Apple’s valuation continues to be compelling as the stock is held back by the market’s desire for new...

I have mentioned my wife Virginia’s fashion business in previous issues of The Lato Letter and so I thought I would share a little press that she received today in the fashion section of The Toronto Star. Enjoy reading. Stealth Shopper: Yes Virginia majors in luxurious leathers By-appointment-only shop owner Virgina Lato offers chic, elegant merchandise to the over-35 set from her homey location in Rosedale. Yes Virginia, an appointment-only retailer in the lower level of a Rosedale house, is both comfy and discreet, Rita Zekas writes. By: Rita Zekas Special to the Star, Published on Wed Mar 05 2014 Yes Virginia, 44 Gibson St. Intimidation factor: Minimal. The shop is chic but homey, only fitting considering it is in the lower level of a Rosedale house. Number of salespeople on floor: Three, owner Virginia Lato and two associates. Response time: Immediate. Lato offers me a cappuccino, water, tea...

We investors may have been a bit spoiled after an outstanding year in 2013. January greeted us with some volatility and weakness. Discussions about the fabled January Indicator began to ensue. The common perception is that the price action in January sets the tone for the remainder of the year. Statistically, that is indeed the case when considering all years from 1901 to 2013, with up Januarys leading to a 9% return and down Januarys leading to a 1% return for the next 11 months. An excellent report from JP Morgan’s strategist Thomas Lee last week dug deeper into the numbers and the highlights are shown in the text and charts shown below. Lee’s work shows that the January effect is muted when the market is already in a bull market as we are in early 2014. January’s price action does have an impact but historically up Januarys in bull markets have...

It has been a rough couple of days in the markets with one of the sighted culprits being the rapid decline of the Argentine peso. Ironically, I will be spending the next three weeks in Argentina and hope to provide some insight while I am there. In the interim, if the weather and the markets are giving you a bit of a chill, I thought I would try to warm things up a bit by sharing Carl Icahn’s letter to Apple shareholders. Apple’s keenly anticipated results are scheduled to be released after the market close on Monday and I have many reasons to believe that they will be great. Here’s the letter and watch for those results: NEW YORK, Jan. 23, 2014 /PRNewswire/ VOTE “FOR” PROPOSAL NO. 10 CARL C. ICAHN 767 Fifth Avenue, 47th Floor New York, New York 10153 January 23, 2014 Dear Fellow Apple Shareholders, Over the course of my long career as an investor...

To the clients of Padlock, I thank you once again and trust that you are as pleased as I am with your equity returns this year as the equity portion of your portfolio continues to creep up toward a 40% return for the year. As 2013 draws to a close, it will go down as one of the best years in history for the US equity market with returns for most major indices in the mid to high 20% area. The heavily resource weighted Canadian market did not fare as well, with the price of gold and gold stocks weighing heavily on the returns. After a year of such robust returns, it is very tempting to ring the register and realize the gains across the board. As tempting as that may be, I remain very constructive about the markets for 2014 and will continue to invest the equity portion of clients’...

This link is to the Report on Business article following my Market Call Appearance last night. On this quiet US Thanksgiving Day (& Chanukah), I thought I would elaborate on the Top Picks. In case you missed the show, here is the link to the Top Picks segment. These can also be accessed through the Library section of this website. NCR Corp (NCR-NYSE, $34.79) As you can see from the chart below, NCR has been weak since holding its Analyst Day on November 11th. The company provided their outlook for the next three years and there was some concern the outlook was somewhat cautious. NCR has tended to be conservative in the past and I feel that investors have over-reacted in the short term to their conservative outlook and that a great entry point for new investors has been provided. As I mentioned on the show last night, a year ago NCR was...

In previous issues of The Lato Letter I have mentioned both the work of Dr. Ed Yardeni and the possibility of a market melt-up. The latest issue of Barron’s brought these two thoughts together with an article entitled “Lifting the Odds for a Market Melt-Up”, in which Dr. Yardeni is interviewed. Dr. Yardeni started his career as an analyst at the Federal Reserve before moving to the investment industry in positions such as the chief economist at E.F. Hutton and Prudential Securities, chief investment strategist at Deutsche Bank, and now president and chief investment strategist of Yardeni Research. In the article, Dr. Yardeni says, “Since the beginning of the year, I've been forecasting 60% probability of a rational exuberance scenario, 30% melt-up, and 10% meltdown. I'm still there, but I'm wavering and leaning toward the melt-up.” He forecasts that the S&P 500 Index currently at 1771 could hit 2014 in 2014, a rise...

Carl Icahn opened a new website today called “The Shareholders’ Square Table (shareholdersquaretable.com) and unveiled a letter he sent to Apple’s CEO Tim Cook suggesting that Apple borrow $150.0 Billion and purchase Apple shares at $525.00. I do not agree with Mr. Icahn that Apple should go to this extreme amount of a buyback but I thought you would be interested in seeing the arithmetic behind Mr. Icahn’s proposal. My work is based on a series of assumptions along with material taken from Apple’s latest quarterly report on July 23, 2013. Food for thought as we wait for Apple’s next quarterly earnings which will be announced late Monday afternoon (Oct. 28th). This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change without notice. To receive The Lato Letter by email from now on, please click here....

For the past three days, I have attended the Peters & Co. 2013 Energy Conference and have enjoyed many presentations by a wide range of North American energy companies. After seeing these presentations, I was struck by the wealth of enterprising, very capable, and shareholder friendly management teams that we can be proud of in Canada. The level of ownership by management is very comforting as was the knowledge that the stewardship of Canadian oil and gas assets is in the strong hands of these men and women. I won’t attempt to review every presentation but rather present my thoughts on some of the broader themes that I felt were evident. The first overall theme is that the future growth of oil production in Canada will essentially come from oil sands and heavy oil projects. There are still numerous conventional oil areas of growth but they are dwarfed by the magnitude...

The answer to the subject line of the email you just received is “NO” or at least not yet. It has been a while since I have written about Apple (AAPL-NASDAQ, $498.50), the last time being on April 24th after their 1st quarter earnings announcement. It is certainly time to discuss the company and the stock again after this week’s news. Fuelled by the news, Apple has enjoyed its best three-day move in over three years, rising 10% this week. In case you missed it, on Monday it was reported that Apple will be having a presentation on September 10th to apparently announce the release of the next iPhone. That was followed on Tuesday by the “tweet” from Carl Icahn, the billionaire activist investor, that he has invested over $1.0Billion in Apple and has initiated conversations with Apple’s CEO Tim Cook with respect to capital allocation within Apple. As an aside, there...

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