Element Fleet Management (EFN.TO)

This is a financial and it is clearly on an acquisition trail. Today’s price is $14.75 and he has a model price of $14.15, so it is bang on its model price. If you are looking for value, there is no real value here.

(Market Call Minute) Addresses a space that the banks exited.

Trinity Industries (TRN-N) had been leasing railcars, which tied up a lot of capital, but was ultimately a business they didn’t really want to be in, so they have been selling that part of their business in tranches to Element Financial, a growing asset-backed lender that has really done a great job of expanding into the railcar business. Have now made a transaction for the auto fleet business. Reported this morning and loan originations were a little bit light, but generally on track.

Just recently bought PHH Arval in the US, and he thinks there are huge, huge synergies. If you want to own a financial without exposure to Canadian housing, but exposure to the US housing market, this is where you want to be. In 2015, it is going to have cash earnings of around $1.25, assuming no further acquisitions. Trading at a market multiple for financials, but is growing much, much faster. Thinks that in 2016 they’ll want to issue a dividend. Feels that a midsize regional bank will eventually acquire this company.

(Market Call Minute.) This is a ``Hold`` to a ``Buy``. Has been downgraded by a couple of people, but he thinks Steve Hudson is going to grow it. He is a Hold on it at the moment, because they may have to raise more money, in which case, it becomes a Buy on the issue.

Has owned this in the past. Great management team. Continues to make a lot of acquisitions and continues to grow. This is one that you could tuck away for a five-year time horizon. They may not be around at that point. Had been approached by some Canadian and Japanese banks about buying out their business.

(Market Call Minute.) Huge deals that they’ve done over the past couple of years. Fabulous management team. The cycle is perfect for them.

A leasing based company and typically it is the slope of the yield curve that drives earnings. It is pretty well managed and there is a steep yield curve, so they will generate pretty good profitability and growth for a while. If we see a flattening of the yield curve, then it would not be good.

Owner is very sharp, and has done this before. Had some stumbles, but sold for a nice gain. He is a good promoter of his stock. Not cheap, but people who got in early are doing well. Pretty impressive chart. He would prefer owning Accord Financial (ACD-T).

Had this as a Top Pick previously. Still likes it. Have made a number of large acquisitions in the last year. Now have the balance sheet leveraged enough, he thinks, that there is US interest. You are looking at an earnings progression something like $0.60, $1 and $1.40. Big, big growth coming in the next two years. He thinks it will be at $17-$18.

This has been in a trading range for the better part of a year or more. You try to buy at the bottom of the trading range as it bounces off. There could be some upside to the general resistance level of about $14.70, and could be worth a short-term trade. Until it breaks out of that choppy sideways formation, he doesn’t know if he would be a long-term investor on this. Would probably be more inclined to trade it.

A leasing company. Did a US acquisition recently which he looks on favourably. Used a lot of equity to finance it, which puts their balance sheet in great shape, and potentially allows for a investment-grade credit rating going forward, which would lower their costs.

Model price is $16, an 18% above. It looks good and should go to the $18 area if people get bullish on financials.

Acquired this when they did a big financing recently, and he feels quite positive about it. Their most recent acquisition of a large US fleet, will defer their taxes for a good 10 years or so. Strong management team. Lots of integration opportunities. Expects there will be a credit upgrade, and this will be the fastest growing financial in Canada in 20150-2016. Trading at around 12X forward earnings, good value for a company that will grow as quickly as it will. $18-$20 in 18 months.

CEO is executing very well, and the company just continues to grow. $4 billion company now, and he wants to get it to $20 billion. Continuing to look for acquisitions. Thinks they got a very good price for the PHH leasing business, and feels it will be highly accretive. Once this deal goes through the market, he thinks you will see $15-$16 pretty quickly.