Celestica Inc (CLS.TO)

(A Top Pick Aug 2/13. Up 7.75%.) Thinks this is still a Buy. Has broken out of a very long sideways base of 10-12 years. Gradually transitioning from a handset manufacturer towards medical and aerospace, where there is less competition.

Impressive balance sheet. In the right space. Got whacked when BlackBerry (BB-T) pulled their business, but they seemed to have replaced that with other stuff. Great capital management. The problem is that it is such a low margin business and there is no moat to their business. It is very tough for him to Buy this company.

Just reported earlier this week. Numbers were good, but softer than people expected. He exited at $10 at his previous employer. He owns just a little bit. You won`t be hurt by this story.

Have done a pretty good job of turning things around. They were in dire straits in the recession when they had overcapacity and their balance sheet wasn’t that great. Have bought back a ton of stock, and are now basically waiting for the economic situation to come to them. This is a later cycle economy stock. When business is so good in the tech world and people need third-party manufacturing that is when they really start to coin. Because they bought back a lot of stock, their earnings leverage will be really good at that point in the cycle. Still a little early for this kind of scenario, but for a 2 or 3 year time frame, you should be okay. Not a bad company.

Not a name he has looked at in the long time. We are going through a correction like a lot of tech stocks. There is a lot of support around $10.40 from the beginning of the year. If it goes much below that it could be very damaging.

Model price is $21.39, 57% upside. Had positive news in terms of earnings. He likes it and thinks it will go higher. They would do well if they could sign on some long term business.

(All 3 Top Picks are 1) out of favour 2) high Short position and 3 ) displaying positive relative performance. An ideal setting for a Short Squeeze.) This has a Short position of 18.2%. Chart shows the spread widening and breaking out, between this and the TSX. That would probably cause the Shorts to start covering.

Came out with some really good earnings last quarter. He knows that they had issues with her communications sector, and there is a bit of a downturn. Their solar hasn’t worked out all that well. We need to see more Top End of this company. There are so many other companies out there that he is not looking at this or buying. There needs to be a bit more growth.

Has a lot of cash on the balance sheet. Without that you are trading sub-11 times earnings. They lost RIM business, but as they book more business it will add to valuation.

Do outsource contract manufacturing. In the top 5% of his database. Over the last 2 years they have been diversifying away from high-volume commodity hand sets, etc., and towards a more stable and high-margin long product cycles that occur in medical and aerospace. Has a 12.5% forecast return on equity and 8.5% trailing free cash flow yield. Cash of $483 million.

He has a problem with the business. It is a manufacturing stock with very low margins. They have done well for a long time, but you have to compare them to other manufacturing stocks and it does not look that cheap. Hold at best or sell to stick the money somewhere else in real technology.

This stock looks great. Had a nice breakout at around $11.50. Shows lower volume, but that is typical in the summer anyways.

Not on his Stock Watch list because it had a tremendous run. You always have to watch how much compensation management gets, what the board gets, etc. Have good people on the board, but generally speaking boards always want to be well compensated.

Established an upward trend, is trading above its 20 day moving average, and it is outperforming the TSX. These three indicators all say to buy this one. But he suggests taking some profits not too far down the road.

One of the great Canadian tech companies. Chart shows a long trend from late 2012 that has been broken recently, but what is interesting is that the recent top, that took place halfway through 2013, was broken. It is kind of testing that top at $11.50-$12. Wouldn’t want to see it break that top, but so far it is reasonably healthy. If you are looking to Buy wait to see if it will hold, and then Buy as it starts to move up.