America - 04/01/11

America (52.6% of asset mix) (with net present value in 1 year) 1. Manulife Financial (MFC) CA$31.4 STRONG BUY 2. Google Inc. (GOOG) US$754.6 BUY 3. Wells Fargo Financial (WFC) US$43.8 STRONG BUY 4. General Electric (GE) US$23.5 => US$25.2 HOLD => BUY 5. TD Bank (TD) CA$92.3 HOLD 6. American Express (AXP) US$48.6 HOLD (pending to update) 7. Suncor Energy (SU) CA$50.0 BUY (pending to update) · Mar 11 major transactions: switch Imperial Oil (IMO) CA$52.0 to Suncor Energy (SU) CA$41.3; add Canadian Pacific CA$61.20; sold TransCanada at CA$39.2 · General Electric may get into lawsuit on Japan’s nuclear crisis. So far, analysts think it is very unlikely for GE to have a high contingency loss. On the other hand, given the fact that lots of people rise concern about the security of nuclear power, Bilibala think GE will receive lots of additional orders · government will not and cannot replace all nuclear plant at once, clearer energy to use are wind & solar, which both will benefit GE · in order to improve security & safety, government need to spend more on existing nuclear plant, which will benefit GE as well · Investors rise concerns on the internal control of Berkshire Hathaway on how Warren Buffett handle David Sokol purchase of Lubrizol stocks in Jan 11 just before Berkshire Hathaway announce to acquire it in Mar 11 & took a capital gain of $3M. To me, even Mr Buffett think Sokol did nothing wrong, as a CEO of a well respected giant corporation, the way he managed this issue should be done better by taking action and disclose it earlier. · As some of you hold RIM (Research in Motion), let me spend some time to share my opinion. · 2010 revenue & profit up 33% & 47% to US$19.9B & US$3.4B compare to last year while net margin improved from 16.4% to 17.1% · According to its own outlook, 2011 revenue & profit will up 41% & 22% to US$28.0B & US$4.2B while net margin will fall from 17.1% to 14.8% (with a estimated 2011 market shares in smart phone of about 15%) · Some analysts said RIM will be the next Nortel Network, Bilibala don’t think that will be the case cuz: 1. RIM’s earning growth is strong, above 20% per year, while price over earnings ratio is just 9, in comparison to Nortel’s tiny earnings and over 100 P/E before it fall, they are totally different 2. RIM has no long term debt, while Nortel had tones!! · Yes, RIM’s growth is slowing down, its profit margin is dropping, but given its P/E ratio at 9, PEG ratio of 0.5. I still think RIM should have potential to climb back to CA$70. Even though I won’t recommend a BUY, but for those who are holding it, Bilibala’s suggestion is to hold till release of 1st quarter (around jun 2011), the price should climb back because I think its earnings will beat expectation. · With more information, Bilibala will revised Manulife Financial’s Japan earthquake impact. · Assume 30,000 death, 80% insurance penetration, 8% market shares, CA$0.5M coverage, 80% loss & found & submitted claims, offset with 10% reserve release, the additional losses set up for the event will be CA$0.7B, less 29% tax rate, after tax impact will be CA$0.49B, while equity market rebound, estimate drop in EPS is about CA$0.3. # Bilibala personally uses fair value @ 2016 to do all investment, however, I think for most small investors, net present value @ 2011 (fair value multiply by discount factor), would be more relevant. · STRONG BUY with NPV over MV above 30% · BUY btw 15% to 30% · HOLD btw (15%) to 15% · RE-RE-RECONSIDER below (15%)