Celestica Inc (CLS.TO)

(A Top Pick Aug 7/15. Down 6.9%.) The company has worked diligently to move away from hand sets and are now more towards servers, and more importantly towards medical and aerospace. If you can design into a pacemaker or an airplane, you’re typically there for 10 years. There is less price competition, better margins and less turnover.

Trades at 5.4X enterprise value to EBITDA, against a 22% EBITDA growth, which is cheap. With strong growth, this gives 2.5 EBITDA. Free cash flow up 55% over the last year. In the last 30 days, earnings estimates have been cranked up by 3%. A strong trailing free cash flow of almost 11%. 15% trailing ROE.

(A Top Pick Jan 2/15. Up 13.33%.)

It has good growth over the next few years and trades at a good multiple. There is nothing wrong with it.

$2.2 Billion Market Cap. A Contract Manufacturer for Computer Equipment, Servers, Communications, Healthcare and Aerospace. In Healthcare and Aerospace, it is a much longer contract to get designed into, but the advantage is that once you are designed in, you are good for 7 to 10 years, and margins are much better than in the electronic space. Have about $500 Million in cash, about 24% of the Market Cap. Looking at the Enterprise Value to Earnings, earnings are expected to be $2.26. This appears to be heading higher.

The period of seasonal strength is from December to April. Right now it is still looking very good. Technically it is in an upward trend, trading above its 20 day moving average, and its strength relative to the Canadian market is very, very strong. Even though it is past its period of seasonal strength, as long as it continues to outperform the market, stick with it. Watch your technical indicators. As they start to roll over in the corrective phase of the market, that is when you want to start taking money off the table. Stick with this right now, but watch it very closely.

(A Top Pick June 10/14. Up 15.4%.) He is very pleased with this. They end up doing well on free cash flow generation. Continuing to transition from commodities (cell phones). Their longer-term plan is to move towards aerospace and medical, where the margins are better.

He is not surprised they are doing a share buyback. It is inexpensive. They have no debt. It is one of these show-me stocks and he won’t get rid of them until they disappoint.

Not a business he would get excited about because it is very low margin, but the stock chart is good.

(Top Pick Jun. 10/14, Up 11.79%) There are good long term growth prospects but he got out because it did what he wanted it to do for him.

Canadian technology companies in general are really doing well. This company is delivering on their numbers.

This is cheap at 6.3X enterprise value to EBITDA. 13% ROE forecasted for 2015. Has over $500 million in cash, which is about 27% of their market value. Huge free cash flow generator of over $164 million over the last 12 months, and an 8% free cash flow yield. Thinks it is breaking out. Above $14 is the point where, on large volume, you wait for that and then be an aggressive buyer.

(A Top Pick Nov 20/13. Up 21.64%.) This company was really keen, had spare capacity. Given the high cost structure, you need more business to come online to get your margins where you want them. There is still quite a bit from this. They haven’t really fired on all cylinders. It is always some part of the business that hasn’t seen the demand that they have wanted. Very attractive on a valuation basis, given the cash on the balance sheet.

Has never been comfortable with the story. They are an outsourcer with very low margins. They are still growing on a global basis, however. They are manufacturing, not technology. He would have a look at it if it was below $12 [which it is now].

(A Top Pick Aug 27/13. 12.07%.) It was extremely cheap when he bought it. They had a lot of cash and were buying back a lot of shares. Margins are starting to grow from the diversified business. Sold his holdings.