TopPicks from Lorne Steinberg, president, Lorne Steinberg Wealth Management
Lorne Steinberg, president of Lorne Steinberg Wealth Management, discusses her top picks: Microsoft, Viatris, and Universal Music Group.The decline in the price of Microsoft shares has led to an excellent entry point for this unique company. The company has successfully leveraged its cash flow from Windows and Office, to become a leader in cloud computing, its fastest-growing vertical.
At the current price, the shares are compelling. Revenues are still growing at eight to 10 per cent over the next few years, with significant free cash being allocated to growth initiatives , dividend growth and share buybacks. Viatris was formed by the merger of Mylan with the Upjohn division of Pfizer. About half of its revenues are from branded drugs , with the balance from generics, over-the counter-products and its recently acquired eye care businesses.
The company recently sold its biosimilars business for $2 billion and is using the proceeds to for acquisitions, debt reduction and share repurchase. In terms of valuation, this is the cheapest stock we own, as it trades at a P/E of less than four. At the current price, investors should be very well rewarded over the coming years, while earning a dividend yield of 4.7 per cent. UMG is the global leader in music – both recorded and publishing with more than 50 labels. It is home to many of the greatest-selling artists of all-time . Streaming and subscription services now account for the vast majority of revenues.
This company was spun out of Vivendi in 2021, so it is a relatively new public company. This business has healthy profit margins and strong growth which should translate into rising profits and free cash flow for years to come. The shift to streaming has increased the monetization of music, and UMG is the major beneficiary. A number of well-known artists have recently sold their catalogues at hefty valuations which gives some idea of the underlying value of this unique business.
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