High Liner Foods (HLF.TO)

He imagines they are shopping right now because there is money to finance an acquisition. This is an opportunity to get in. The insiders own a lot of stock so it would be a hard company to acquire.

Down $1-$2 from where he bought it, due to operational hiccups. They were moving around some of their manufacturing facilities, trying to rationalize them and it should have affected an improvement in margins, which didn’t happen. There was also a decline in volumes in their most recent quarter. The valuation is very compelling, however it has turned into a bit of a show me story. You are going to need to see volume growth stabilize and some of the synergies start to flow through.

Had one bad quarter and it seemed like the whole world was going to end for the stock. It made no sense whatsoever. Frozen food has a huge scale in North America. It generates a lot of free cash flow. Dividend yield of 2.91%.

They had earnings that were disappointing that they blamed partly on currency and partly on lower volumes of fish. They tried to put through a price increase, but it did not go through very well. He likes it, it is very inexpensive after the fall it has had in the last few days. It is a bargain at this price. The 2^nd quarter is always their lowest quarter.

Made major acquisition in Iceland and then the stock price exploded. It has not done much in the last year. They have to consolidate. He thinks they will make more acquisitions going forward. As the economy recovers, more people eat out and HLF-T supplies a lot of restaurants.

There are a lot of takeovers in the food industry, and this can be taken over in a second if it wanted to, but they don’t want to do that. They want to continue to grow and expand their reach in Canada and the US. Organic growth has been lacklustre, but with the improving US economy, this will hopefully spill over. Generates a lot of free cash flow. Planning to pay down debt this year, and could be in a position to make another big acquisition by the end of the year. Only trading at 11X next year’s earnings.

Clearwater (CLR-T) or High Liner (HLF-T)? She owns this, so this is her preference. They have suffered, because they supply the wholesale restaurant business, and that business has been a bit slow, but is picking up now. Have been going through a transitional year, and over the next year earnings will pick up. Solid management.

This is one he wants to hold for a very, very long time. Have a lot of things going on in their favour. Distributes frozen seafood, and more protein is going to be eaten globally. Has distribution all across the grocery chains. As fuel prices drop and the American consumer gets wealthier, maybe they’ll go out to eat more. Valuation is incredibly cheap at about 13X next year’s earnings.

Empire (EMP.A-T) or High Liner (HLF-T)? He would choose Empire.

Checked back to about $20, but now seems to be finding its footing. If some people are nervous about where the economy is going, the food companies tend to be very, very defensive. Thinks it will back up into the $25 point in six months, if not sooner, and then you will be into profit territory.

Distributor of frozen food as well as value added. The company is slowly, but surely gaining more presence in the US through the retail chain, as well as selling into restaurants and hospitality. Likes their recent acquisition, and expects they did this to get more into Wal-Mart and Sam’s Clubs, and that would be more of a jumping point to try and sell more of its existing retail products and get a better relationship with Wal-Mart. Thinks they will earn between $1.50 and $1.60 in 2015. Yield of 2.1%.

In his process, this ranks in the middle of the pack. They have very strong management, but what he is looking for is a ramp-up in accelerated earnings growth. Doesn’t see this right now. This could be a long-term hold in a portfolio. He would wait for more of a catalyst.

Was one of his largest positions, but he sold it before the split. It was getting a bit expensive. Their costs started to increase. Canadian food services encountered some soft spots. They didn’t meet their profitability targets for the next few quarters. Probably good value around $20. He may return to this stock. They are paying down their debt and they will raise their dividend at least yearly.

A fine company that has done a very good job with their acquisitions. Earnings growth is looking much better these days. The dividend is looking better. A name that is heading to new highs, but doesn’t get much attention. A solid, consumer company.

Likes the stock and the distribution network that it has. Growing into the US. Adding more branded fish as well as having more exposure to US restaurants. Generates lots of free cash flow, which is being used to create acquisitions. 1.8% yield.