CAE Inc (CAE.TO)

This would be considered as part of the industrials and down into the aerospace sector seasonality, which it follows very closely. Historically the best time to own has been from around the end of January until around the middle of June. Currently the trend is slightly on the downside. There are early signs of outperformance.

This is the third or fourth time he has picked it, but he feels that eventually it has to break out. You are safer to wait for it to break out and confirm the uptrend.

(Top Pick Feb 27/15, Down 11.32%) He sold in the summer. He is not overly bearish, but he found better places for his money.

(A Top Pick Feb 27/15. Down 2.47%.) We are really in a market to protect, and not try to hit home runs. This company has done that. Has sold his holdings.

(Top Pick Dec 21/15, Down 4%) He has been waiting for it to break out. Military spending might be going up. It is outperforming. It was not damaged during the selloff. We wants to see it take out the highs.

(The background of the 3 top picks is that they are dividend paying stocks.) This is cheap. Trading at 9.6X enterprise value to EBITDA. Earnings are forecast to grow at 12% both this year and next. Free cash flow yield of 3.3%, up 125% year-over-year. 14% ROE is forecasted. Dividend yield of 1.94%.

(Top Pick Jan 6/15, Up 4.34%) He favours the industrial and aerospace sectors. $15.75 will be a break out if it does so on good volume. He sees more military spending and they are the beneficiary of that. It is one of Canada’s few choices in defense. It is outperforming the TSX and is the start of a trend that is going to last.

Moves higher from Oct to May of each year. We saw it try to bottom but there is a big zone of resistance right now. If it breaks it, it is positioned for a recovery.

In the recent quarter they did very well on the civil side, which surprised everyone. Well positioned to take advantage of the increase in new jets that are going to be sold, whether commercial or military. Selling at reasonably good multiples. Dividend yield of 2.11%.

(Top Pick Feb 27/15, Down 0.79%) He sold because it fell below others on his ranking based on his specific criteria.

$3.9 billion market cap with $280 million in cash. Pays a 2% dividend. Has a 3% free cash flow yield and 13% ROE. Trading at 9.5X EBITDA. Has a year over year EBITDA growth of 13%. A sleep at night stock. Earnings growth is expected to be 13% this year and next. Just announced $300 million in new contracts on the flight simulation side.

(Top Pick Sep 26/14, Up 12.12%) He is disappointed but would still hold it. He wanted a decisive breakout but it did not. Until it is extremely popular he will hold on to it.

(A Top Pick July 28/14. Up 6.7%.) This was a Top Pick again for him recently. They recently announced they were selling their mining business, a very small part of their business. He thinks they are going to stick with the avionics and health care side of the business for the time being. Has always been an extremely well-managed company and is very well positioned in the aeronautical industry. As economies globally, they’re going to be more airlines and more pilots needing training. They will also benefit from any increase in military spending.

(A Top Pick May 22/15. Down 2.3%.) Aerospace is one of his favourite themes. This company has been trying to break out of a series of highs of a little over $15. Every time it tries to break out, it gets smacked down again. A very frustrating stock. Still a Hold if you own.

(Market Call Minute.) Thinks there is a lot of growth ahead because there are so many retiring airline pilots. If it were a little bit cheaper, he would probably think of buying it.