ECN Capital (ECN.TO)

(A Top Pick Sept 6/16.) Split into 2 companies. ECN Capital (ECN-T) was up 21%, while Element Fleet Management (EFN-T) was down 11%. He likes both.

Had owned this before the split and did okay on it. CEO couldn’t consolidate the fleet business more aggressively and there wasn’t a lot of growth, so he split the companies and then proposed the structure. Thinks it was completely full of conflicts of interest. The investment community is supporting this because the CEO is a wonderful guy in promoting things. Sold his holdings, because he won’t invest in companies where he doesn’t have confidence in the management team. This has been a massive destruction of shareholder value.

A recent spinoff from Element Financial. The stock has had a hard time getting anything going. However, the valuation of the business looks compelling and is something he is watching. It should improve if you believe in his thesis that the economy is improving in the US. This is a name that should do well in that environment. He is a bit cautious on this, but is following it.

He likes this. It was a spin out from Element Financial, which split into 2 companies. About 80% of the value went to Fleet and 20% to this company. Almost all the analysts were of the view that this should be priced on a Price to Book, so if you say it is worth at least BV, which is approximately $4, it should trade up. They recently sold some rail assets, which went for about 1.2X Book. With that, you could get up to about $6 for this. Also, there are a couple of catalysts coming up in January to move some of their rail assets into a third-party vehicle, which will put a revaluation on those assets.

Recently bought the stock. This is the 1^st day that Element Financial shares are formally split into 2 companies, ECN Capital (ECN-T) and Element Fleet Management (EFN-T). Thinks both are undervalued. He tends to do this in terms of the Price to Book ratio. The BV is more or less about $4, so if you assign a Price to Book ratio of 1 to 1.25, you get a price of $4-$5 for a share price. Both companies are looking to do some acquisitions which could transform things in the next couple of quarters, but both assets are attractive right now.