EnerCare Inc (ECI.TO)

He is probably one of the largest shareholders. Significant ownership of water heater rentals and sub metering business. Growth is on a stable path. An acquisition from Hydro One should have significant synergies.

Thinks the trends are positive for this company. Expect they will be up to generate better rates. Doing a very good job of managing some growth. Has a strong dividend.

Still loves the name. 5% yield. Very cheap relative to the sector. The street is not giving them any credit for their sub-metering business, which is going to supply the growth in the long term. Have a number of initiatives going on in their core business that can get reasonable organic growth. They have the ability to pass price increases on. Also, doing more business in the air-conditioning and heating business, which tends to have bigger tickets in the types of equipment they are using.

This IPO’d in 2002 under Consumer Water Heater. A lot has changed since then. One third of their business is sub metering for condos and apartments and two thirds of home services, air-conditioning, water heaters and furnaces. This business is a high percentage of recurring revenues. Very cash flow heavy, which is great for dividend investors. Dividend yield of 5.56% and they are able to sustain this with only 40% of their free cash flow. He is expecting some dividend increases from them. Only 22% of their overall contracts are in the billing stage, so cash flows are going to grow.

They just raised the dividend 15%, the biggest in their history. They might increase the dividend again at the end of next year. He has tremendous confidence in the management. They have had less customers falling off them recently. Companies they bought turned out very well.

(A Top Pick March 7/14. Up 45.09%.) In this one, he saw excellent management execution of turning this business around. He continues to own, but wouldn’t be a buyer at current levels.

He likes this company. Their main business is water heaters, primarily in southern Ontario. This should be a very, very sleepy business. Last year they had an exceptionally exciting year. Octavian, a US hedge fund, started shaking a few cages by talking a “go private” bid, which got the share price moving. Then they bought Direct Energy. Inexpensive at 8.5X EBITDA versus its peers at about 11X. About a 6.5% dividend yield. Great, long term investment. The market is not pricing in any of the growth from the sub-metering business, which will give it the kicker in the next 5 years going forward.

Long. A Pairs trade with a Short on Just Energy (JE-T). This company rents water heaters, primarily in southern Ontario. A very stable business. Had some attrition issues in the past that have been addressed, partly through legislation that has gone through. The overaggressive seller is Just Energy. What he really likes about this is that it is inexpensive and trading at 8.5X EBITDA, which is a discount to its peers at about 10X. Payout ratio is about 50% next year. Yield of 5.01%.

Has appreciated fairly sharply in the last short period of time. This is a company with a very low Book Value and selling at a high multiple of Book, but the earnings on that Book are significant, and the cash flow it has been generating has been improving. Just finished acquiring some holdings from Direct Energy. Thinks they are in very good position in the longer term. At the current price, he considers this as a Hold not a Buy.

(A Top Pick Sept 18/13. 67.35%.) Pairs Trade. Went long on this stock and Shorted Just Energy (JE-T). Still really likes this name. They rent water heaters, primarily in southern Ontario. Have very predictable and steady business. Good yield. Trades at about 7X EBITDA.

Have been raising their dividend handily. Has a lot of confidence in management. There is a takeover bid, but Enercare wants more money on the table before they will even look at it. He is waiting for a higher offer to come in, which often does in these cases. He is happy to Hold at this point in time.

Company bought some accretive assets which he viewed as favourable. He can see them growing their EBITDA’s by 31% between now and 2015. Also sees their payout ratio coming down to 85% this year, 71% next year and 65% in 2016. He likes it and has been buying. Trades at a slight premium to the group, but given the less cyclical nature of their business, it should trade at a premium. Buy on an off day.

Rents out water heaters. There is an open offer to buy the shares and take them private. They just bought Direct Energy. Thinks it will be accretive. Thinks they will start to get attention.

Just announced they were buying the consumer’s services division from Direct Energy, which now gives them direct access to consumers in Ontario. Largely involved with water heaters as well as running a sub-metering business. He estimates capitalization of the company is going to go from around $800 million to $1.1-$1.2 billion. This is a very accretive acquisition to cash flow, and he estimates it is going to be 22%-25%. This puts out the potential for dividend increases down the road. Dividend yield of 5.27%.

Some of the indicators are starting to roll over. It looks like it is going to have some support. $11.71, or $11.48 would be the stop.