Magellan Aerospace (MAL.TO)

(A Top Pick Feb 28/17. Up 17.83%.) A very low multiple stock. Trades at around 11.5-12×2018 earnings. Part of the reason is that there is not much liquidity with the company. All the other companies in this space trade at around 18X earnings. There is a good chance this company may eventually get taken out. He is going to continue to hold.

He really likes this company. The multiple is very low. When he recommended it in the past, it was about 10X earnings. You only have to get a couple of multiple readings above that to get a much, much higher stock price. Last quarter wasn’t great, but thinks the cash flow generation is still there. The problem is that it is very illiquid, so for individuals it is a good one to own, but for institutions it is difficult.

Manufactures components for Airbus and Boeing. Trading at 11X trailing earnings and 10X forward earnings. They’ve done an incredible job. At some point, maybe they buy something, and then they can add some liquidity. A good balance sheet. They’ve grown the earnings at 24% over the last few years. Dividend yield of 1.5%. (Analysts’ price target is $23.25.)

Has always had nice contracts with Boeing and Airbus. It has been a long horizon for them to get to the stage to finally enjoy some of these great contracts. As long as the aerospace business continues to do well, and he thinks it will, the company will do well. This is one you probably should think about owning.

A real Canadian success story. Manufacturers landing gears. Doesn’t have a lot of customers to sell its products to, but has an entrenched relationship. Over time he expects we will see more air travel, especially coming out of Asia. An interesting way to play that.

(A Top Pick Nov 12/14. Up 20.99%.) There has been tremendous growth in the airline business. A wonderful Canadian story. Thinks it is going to be a continuing growth story going forward.

(A Top Pick Nov 12/14. Up 27.78%.) The drop in energy prices has certainly helped this company. You are probably better off owning an airline manufacturer rather than an airline itself. This makes all kinds of airline components.

Like others in the aerospace parts manufacturers, it is in a pretty good space because the number of plane orders is going up and you are going to see continued growth in revenue streams. It has really gone sideways for most of last year. There doesn’t seem to be any signs of a roll over yet.

This is a classic Canadian exporter. They were hurt really hard when the Cdn$ was at $1.07. Since that time their margins have lifted and expanded nicely. Revenues have grown. Aerospace backlogs go out another 5 years. Trading at 10X earnings. Yield of 1.64%.

(A Top Pick Nov 12/14. Up 1.57%.) He really likes this because the demand for aircraft parts is still tremendous. A great Canadian story that is not about financial services, energy or materials.

(Top Pick Jan 10/14, Up 67.01%) It was knocked down the week before he came on, to dumb levels. They have been buying back their debt aggressively and now they are raising their dividend. This is going to play out for a long time here.

(A Top Pick Jan 10/14. Up 71.81%.) The fall in the Cdn$ and the rise in the US$ are going to make manufacturers, especially Canadian ones, very attractive. This company had the added leverage of debt on their books, which they have not paid off a lot of. There was also multiple expansion. Recently sold some of his holdings, but would add back to it below $12 and would take it off closer to $14.50-$15.

Bombardier (BBD.B-T) has had its struggles. Has to both develop a product and sell it. This company has some very high quality products and can play both sides off against the middle. They supply everybody. Demand for new aircraft has been significant. The concern is that with energy prices coming lower, a lot of what has driven the demand for new aircraft is the new fuel efficient designs that a lot of manufacturers have incorporated. Dividend yield of 1.62%.

He likes it and has recommended it on BNN. The multiple has not yet caught up to how good the story is. It is growing its earnings at about 15%. Canadian dollar revenues and US$ expenses with margin expansion and they are delevering their balance sheet. Thinks you will see better dividends, share buybacks and growth next year as well as a multiple expansion.

An Aero supplier and parts business. Doing quite well right now because of high demand.