Aecon Group Inc (ARE.TO)

One of those great Canadian names that is benefiting from that trend of becoming a $1 billion company. Have a massive backlog, which is up over 50% year-over-year. Valuation is reasonable at 6-6.5X EBITDA.

(Market Call Minute.) Great story. There is more in the tank.

This has had a great run. He sold his holdings too early. They have good positioning in the Canadian construction market. However, it is currently fully valued. Well-run company for the long-term, but wouldn’t necessarily buy it today.

(A Top Pick June 10/15. Up 32.85%.) He likes this and the whole space a lot. Has just added to his holdings recently. This is going to be a beneficiary of future infrastructure. (See Top Picks.)

(Market Call Minute.) This is more of a trading stock. They have a backlog that has picked up quite nicely due to infrastructure spending that is happening. If you can get this cheaper, that would be great.

Aecon (ARE-T) or Stantec (STN-T)? A great Canadian stable company. He uses it as a dampening mechanism in his portfolios. There is a lot of infrastructure to be done. A great, consistent business. Every time he has made an assessment of these 2, he has gone with this one. The stock is now at the higher level of his valuation, so he owns the bonds.

At these levels, he would be cautious. Just reported quite good earnings. Getting some very strong revenue from their nuclear work with SNC Lavalin (SNC-T) on the Ontario Hydro Bruce facility. Also, the energy backlog is quite good. They have some good potash work. Have executed well.

This will get its fair share of infrastructure spending that governments are planning on. They do a lot of business in the mining and oil/gas business. Thinks it is going to be a very difficult environment for manufacturing and infrastructure that is not government related. He is somewhat apprehensive about this company being able to grow its earnings, because of the weakness in the energy patch. Even if this recovers, it is going to be a long time before there are major investments, as companies are going to have to pay back their debts first.

This is a beneficiary of the Liberals’ infrastructure program. Operationally doing well. They sold some assets and cleared up their balance sheet. The government is supporting the industry. The stock chart looks scary, but the fundamentals are solid.

He is modelling that they can grow cash flow per share compounded over the next couple of years at 15%. Trading at a discount to its 5 year average and at a price/cash flow of 7.1. Has a record backlog right now. A nice dividend with a low payout ratio, which can be easily boosted over time. The only issue is that their energy segment is a little challenged.

The Liberal government is already baked into the chart. They did a recent earnings beat related to Ontario, offsetting Alberta energy. He is looking to add to it aggressively, especially as it comes to the bottom of its recent trading range.

Would prefer SNC Lavalin (SNC-T), just because it is cheaper. However, this is also a beneficiary of the federal government putting more money into infrastructure. If you are a believer in $50 oil, this is more of an Alberta energy oriented company. He can see 10% upside from here, but more in SNC.

Convertible 5.5% bond due Dec 1/18. This can be swapped for stock at $19. The company’s balance sheet is very conservative, so he knows he is going to get paid back at the end of the day. This is also a play on the provincial and federal infrastructure plays. One 3^rd to half of revenues comes from public ventures such as subways, etc.

(Market Call Minute.) Safe and would buy it.

(A Top Pick Feb 25/15. Up 24.9%.) Were really impacted because of great exposure in Alberta, but thinks that was an overreaction by the market. Have been gaining some significant contracts. Still a Buy.