Loblaw Companies Ltd (L.TO)

(A Top Pick May 6/14. Up 36.18%.) This was picked right after Shoppers was closed. Stock had pulled back because of weak numbers on their grocery side, and she felt it was a good time to get in. We are still going to see a lot of benefit coming through from the acquisition. There will be an increasing free cash flow. She has a price target of about $70 in 12 months.

It is a quality company. There was a big flow of funds into consumer stocks so it is a flow of funds type of trade. L-T was due to catch up, but they have done that and from here the returns will be pretty tough. He is not in any Canadian retailers.

Stock vs. Stock. EMP-T vs. L-T. L-T finally turned the ship around according to the AGM today. EMP-T still has some levers to pull to unlock shareholder value. It has been lagging L-T. He likes the sector. You get a dividend increase every year.

This is a company that is doing everything right. Increasing their national footprint. Expect synergies and cost savings with its integration with Shoppers. Valuation is high, but it reflects the fact that we are still 40%-45% off in terms of the price of energy, which has implications for the consumer which he thinks are going to be long-lasting. Also, this is a more defensive area to hang out in.

If you are making money on it, take a little bit of profit off it. Resource money flowing into non-resource is overinflating it. It’s a very competitive business.

They may have more synergies and results because of Shoppers, but it is a very expensive and tough sector. He would only buy it on weakness. In hind sight he should have kept his Shoppers stock before the acquisition and held it as L-T.

(A Top Pick April 1/14. Up 41.53%.) She had liked the Shoppers acquisition and the stock had pulled back. Thinks their cash flow is going to start ramping up and they will be buying back stock and paying down debt. Likes the drug retail space and Shoppers is great chain with great locations.

Empire Company (EMP.A-T) or Loblaw’s (L-T)? The grocery space is a fairly consolidated market with 3 or 4 major players and relatively defensive. With the exit of Target, the square footage as really moderated, this is a plus. If she had to choose among all the players out there, it would be this one, because of the drug retail side.

Has had a fantastic run. Part of that is because the stock had languished for many, many years. In the last few years they have monetized their real estate holdings through a REIT, improved their operational results, improved margins as well as acquiring Shoppers. You probably want to stick with this one.

4^th quarter results were a little disappointing. Valuation trades at 18 to 20 times. Even though they are going to get a bump from Shoppers there is still chronic oversupply in the grocery store business. Too much competition. He would avoid this until it goes down at least 10%.

(Top Pick Mar 5/14, Up 29.65%) She bought when they had just completed the Shoppers acquisition and were having problems rolling out SAP. The stock had pulled back. Things are largely working now and they are seeing the benefits. Target was a concern and they have exited. We are starting to see cross selling between the two chains. She would buy it here.

They have been doing well along with the whole food sector because the sector has been able to rise. Regulatory pressures have eased and this has helped their acquisition. They have now done too much of a run up.

If this drops below $59, it would cause him a little concern. If you are thinking long-term, he would go ahead and buy it now, knowing that it could move down a bit. (See Top Picks.)

Just reported good earnings and also at a record high. This is your classic consumer staples name. Very steady and predictable growth along with a modest but growing dividend. They will probably grow their dividend at a 5% clip per year over the next several years. A lot of their capital expenditures are behind them, so you will see that in the earnings and you will see the benefits of those renovations going forward. The acquisition of Shoppers Drug Mart will certainly provide this grocery giant exposure to higher-margin profile. Trading pretty nicely at 18X forward earnings with a 15% growth rate. Dividend yield of 1.54%.

Good company and have a good move up in earnings coming because of their Shoppers acquisition. Their basic food business is pretty brutal. Lots of competition. Without food inflation it is pretty hard for them to get their prices up. Yield is reasonably low, but they are increasing their dividends at a gradual rate.