What's Your Favorite Stock? [by Isaac Babylon]

From time to time we get a financial market report from one of our friends on the Street. I asked Ike Babylon whether he thinks the market is overpriced at the moment. I also wondered what his favorite stock is. Here's what he said. -- DL

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Right now we have a market that's almost priced to perfection reflecting the confluence of positive trends: growth that's significant enough to ward off recession fears but not so strong as to invite rate hikes from the Fed, which remains accommodative; a Goldilocks economy, in other words. There is always global risk, the possibility of a black swan -- like, right now, the corona flu, which is a killer and can spread. And of course there's all the uncertainty in the world -- Brexit, Iran, tariffs, China,  North Korea, Putin, Syria, the specter of Socialism, etc. But we always have to climb a wall of worry. 

Right now I wouldn't put new money into Apple. It's the best stock in the market but it has more than doubled in price and it's a good idea to take a little money off the table. You will still own it if you are in an index fund or  growth mutual funds. 

Microsoft is my favorite stock. It is at 166 and change as I write, but it still has room to run. Our firm gives it a PT [price target] of 190 and that's conservative. Long term I like Disney under Bob Iger's leadership. Their streaming service is a winner; they have great franchises like Star Wars; and I like the way everything is integrated -- movies, theme parks, TV, products. ESPN has been a drag on them but that's largely priced into the stock.

JP Morgan is the of the banks, and if you study Warren Buffett's game plan, you'll see he believes in it as well as Bank of America. I always tell people they should buy some Berkshire Hathaway, class B shares, if they admire Buffett's track record. It's a very conservative investment that you can hold forever. They hold a huge amount of cash, which insulates them from market downturns, when he can swoop in and buy stuff on the cheap. They issue no dividend, which makes it totally tax efficient.

Fidelity Select Health Care, managed by Eddie Yoon, is a good way to play a portion of the market that is bound to grow given demographic trends.
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Thank you, Ike. 

Comments

[T.S. Eliot]

Nice article by this gentleman and i agree with MSFT and DIS as great investments for the present and longer term.

I would also add GOOGL ( the voting shares), TXN ,BMY ( Texas Instruments and Bristol Myers) and ISRG (Intuitive Surgical).. All great long term buy and holds.

I have a host of other recommendations but they're more speculative.