Element Fleet Management (EFN.TO)

The high yield suggests the dividend might be at risk, however, it has a modest 15% payout ratio. The biggest challenge is that earnings were down 21% and now analysts are revising their earnings down 18%. The stock appears cheap at a 6 times earnings price. At the moment, because of the high-yield he thinks there is more risk than he is comfortable with. Yield 7.4%.

The problem is funding even though they split into different businesses. You have to do more fleets and more originations. If anything goes wrong you have no room for error. There is a management gap when one of them left. There is still financial market and growth plus cyclical risk to hit so it is not attractive.

Pretty interesting business. They do fleet management. Sticky revenues. Their CEO resigned. They lost a major customer. One that where maybe there is a lot of value. Lots of Free Cash Flow. But would like to see until the dust settles. A very good business that he is not sure it is working.

North America's #1 leading fleet vehicle/fleet manager. They run fleets of vehicles for corporations. Trades at a big discount to international comparables. Trading at 9X earnings. There has been recent insider buying. Dividend yield of 3.2%. (Analysts' price target is $11.)

(A Top Pick Feb 21/17. Down 30%.) On a standalone basis going forward, this is a cheap, cheap company. Trading at 9X earnings. Management has been buying stock, which is a very bullish signal. North America’s #1 leading vehicle fleet manager. They provide service for their customers on running their fleets more efficiently. Pays a 3% dividend yield, which is likely going to be increased every year.

North America’s largest vehicle fleet manager with a growing dominant presence. Over time they are going to increase their margins and bring a lot of value to the customers in a market that is growing. Trading at a single digit PE. Dividend yield of 3.2%. (Analysts’ price target is $10.25.)

(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.

It has been a difficult one. It split from its ECN and is now trading as two separate elements. There was suspicions that a short seller would go after them. People are concerned about the direction of the company. It will be reasonably sensitive to US economic conditions.

(A Top Pick June 15/16. Down 21.49%.) This was split in two. The ECN piece, if you held it which he has, has gone from $3 to $4. If you had those pieces back, it would still be down, but only half of what is shown.

He doesn’t play with financials that don’t have access to the Bank of Canada. When their funding dries up or comes into question, there is nowhere for the stock to go except down. He is suspect of this whole thing. He has had 2 Sell signals since February. If there was any kind of a rally, he would Sell your holdings.

There was a rumour that Muddy Waters was going to come out with a scathing Short recommendation on this, dropping the stock by 39%. That was incorrect. The company owns fleets of railcars, commercial jets and industrial equipment.

When the original company split, he was more constructive on this side of the 2. A good business. Incremental revenues on solid, long term contracts. They lost a bit of credibility with the street and need to make it back. If they generate good cash flow, you could see a dividend rise. He is just going to wait and see.

(A Top Pick March 15/16. Down 3%.) This was split into 2 companies, with ECN Capital being the other side. ECN is up 16%. These are growth stories that are still proving themselves out. They have another year or 2 or 5 of the growth.

(A Top Pick May 24/16. Up 14.19%.) The separation into 2 companies has led to value creation. They are seeing a great resurgence in the US economy, which is helping.

This is one of 2 parts that was spun out from the old Element Financial. North America’s leading fleet manager and growing organically as well as rolling up other fleet managers over time. They also have some fleet management in other parts of the world. Also, have a lot of peripheral services that they can provide to customers. Trading at 11X next year’s earnings. Dividend yield of 0.71%, which will probably be increased every year. He can see 40% upside from here. (Analysts’ price target is $14.66.)