Element Fleet Management (EFN.TO)

It is a specialty financial services company in a sweet spot. It is working well. They are adding more business. The business book will double this year. They just raised capital to go after a business of GE-N’s. Hopefully, there will be a meaningfully accretive acquisition.

Has been doing really well over the last few years and have been making acquisitions. They take on leases and lease equipment to finance other companies’ projects who can’t afford to invest a large amount of capital. A cyclical business. Feels the stock definitely has legs and is working exceptionally well. A lot of the gains have been made. He is a little suspect that if they buy the GE (GE-N) assets, the stock is going to run up to $25. Not a defensive stock in the event of a market turned down.

(Top Pick Jun 4/14, Up 41.31%) They did a financing and it looks like it is going to be used to finance the acquisition of GE Capital’s Fleet business. Much of this is factored into their share price.

This has a pretty great chart with a positive trend. The period of seasonal strength for financials, runs from January through to April. You can see some of them extend that strength even further, such as this one is doing.

They are getting into a lot of areas that banks have been abandoning to a great extent. So far the execution has been excellent. Growth rate has been very good. Multiples are reflecting that growth rate will be continuing. As a value investor, he looks at multiples on a current basis. He would like to stretch himself and pay because he does think this company will do very well in the long run. However, to him it is expensive on a number of metrics. Excellent management.

Likes this. Had a great break out early this year. He loves base breakouts. Also, fundamentally it is a good company. He likes to see if he can buy this on a bit of a pullback, so this might be ripe for a small pullback. If it pulls back it is probably a great buy.

It is a rarity in the Canadian space to have such a great company and a well known CEO, Steve Hudson. He likes the space that they are in and the spreads that they can make on their business.

One of the best management teams in Canada. They are working on a very, very big acquisition. They are growing quickly. Economic and interest rate scenarios are excellent for them right now. It is a management bet. You have to buy it and hold for 5 years and see what they accomplish.

(A Top Pick June 11/14. Up 48.48%.) Thinks this is going to do again what the market is assuming they are about to do, which is to grow by accretive acquisition. It is the most obvious buyer for the General Electric (GE-N) fleet and probably one of the big contenders for the GE rail. If they were to do both of them, at expected multiples, you would get an accretion of roughly 25%. If the stock just keeps the multiple that it has had before the announcement of the issue, you would get $22.50-$23 a year from now. His one-year target is going to be $23. Thinks they will start a dividend a year or 2 out.

They just did an issue to get cash for acquisitions. They may do a deal with GE for their capital business. You can certainly see it go higher from here.

Have done a phenomenal job of filling a gap that the banks left in 2008. The stock is up off a refinancing deal they did. It scores in the top 10% for him. He holds it strictly on a momentum basis. There is talk they have a big acquisition lined up and that should push the stock higher.

(A Top Pick July 10/14. Up 26.45%.) Trading near the top of his range. This was a benefit of having a non-bank financial in Canada, as well as having the benefit of having 75% of its business geared to the US. Made a great acquisition which is performing fairly well. Good management.

(A Top Pick May 2/14. Up 27.37%.) A financial leasing company. Have made some more acquisitions. They are the logical buyers of General Electric’s (GE-N) fleet business which GE is putting up for sale. If they were to do that, he expects there would be another 5%-10% bump. He is looking for $19-$20 a year from now.

They generated a lot of revenue from fees and he needs to know the source of them. He needs to know it is not a play on credit ratings just so you get a lower cost of funds. He would suggest you keep it if you hold it. Keep an eye on the sectors they are in. They are well managed and well positioned.

Management understands this business very clearly. There is a good opportunity for them to grow. Just made an acquisition in the US, which will help them grow in the US a lot more. Because of what happened in the financial services industry in 2008, there are a lot of gaps in the leasing side of the business, and he thinks there is a great opportunity for them to come in and scoop up a lot of business and grow. A great growth story over the next several years in the US, and a little bit in Canada.