Callidus Capital Corp (CBL.TO)

Became public last April and did phenomenally well. Management has a great track record of managing private equity money. They weren’t great at guiding the street and telling them about their business. Over the last couple of months, the market has been fairly nervous about the economy and what that meant for catalysts. Management stated that they are investing in stressed companies, but it is all backed by assets and secured by real estate or inventory. Trading at a super cheap multiple at around 8X next year’s earnings.

The only pure play in Canada on asset based lending, a type of lending that the banks tend to shy away from. Essentially more distressed borrowers, so in this environment investors are concerned about what their loan book is like. A firm presented a very formidable “Short” case recently, which is probably part of the reason for the selloff. On the 23^rd, they came up with a very strong update in their portfolio, which surprised the market and the stock rallied. Thinks this is cheap. Trades at 10X earnings. Growing their book at a phenomenal pace. They only listed in April of this year, so a relatively new name. He would rather be in this than any of the banks.

This company’s model is one where you should do well in a bad economy. People are more likely to use their services when they are a little bit stretched or have problems. It does well when a lot of the rest of the economies are not doing too well. Has a very high ROE in the 23%-24% range.

This is a lender. Went public at about $14 and was heavily oversubscribed. Every quarter they have come out with very good earnings, and thinks they have a lot of runway here in doing other loans with higher fees. Expects the earnings to ramp up quite a bit. Trading at a low multiple compared to others. Management is quite adept at putting the money to work and having a good return on capital.

Long. A Pairs trade with a Short on Laurentian Bank (LB-T). This is an asset based lender, which he feels is an underserved niche in Canada. Although the big banks have them, it’s not something they really embrace. They don’t like high risk lending. An attractive growth story.