Maple Leaf Foods (MFI.TO)

A rare commodity in Canada: it's a large food producer. It's cyclical. Inflation of commodities may be good for them because they can pass on price increases to consumers. Not enough yield to make him feel safe. If you own it, hold it, but he's not buying it.

(A Past Top Pick Oct 25/16, Up 10.61%) He still likes the business and they are progressing with their turnaround. A lot of the good news is priced into to it so he would take profits and look to get back in if it pulled back.

There is some short term resistance. There is nothing wrong technically. He would be concerned if we took out the lows from the last couple of months. The long term trend line looks good. He is not concerned right now.

(A Top Pick Aug 17/16. Up 20.09%.) He made a profit and felt the shares had become fully valued, so exited his position. If the price pulled back for some reason, he would probably look to re-enter it. Would prefer it at under $30. Feels it is fairly valued where it is today.

A large meat processor. This has been evolving since about 2011. An activist investor got involved, and agitated for major changes, which they undertook. Went through a very aggressive 5-year build where they modernized their whole plant network. The modern equipment and machinery has lowered operating costs. Also, they’ve renovated their product architectures. Instead of just being a bulk processor, they’ve moved into some upmarket and higher margin segments.

A company he likes and has owned in the past. They’ve undergone tremendous restructuring over the last 5 years. Economies of scale are massive for a company like this, which has had an impact on their margins. As margins have grown, so has the stock price.

Money is flowing out of consumer related areas, and into the more cyclical areas of the market. Their earnings came out and they were quite good. They are building a large cash position and buying back stock, so are doing all the right things.

This has done brilliantly considering there have been misfortunes along the way. Protein is in and the company has been doing well. He knows nothing on the horizon that is going to be negative. It has a steadily improving stock price. You just have to keep an eye on the news.

He still likes this. Everything is going well for them. Margins are improving, the balance sheet is pristine, they have a lot of extra cash, and have been looking at acquisitions. The recent dip and underperformance in the share price is entirely related to this sector rotation, where people don’t want to be in safe food stocks, but want to get into cyclicals. A weaker Cdn$ will benefit them and a stronger US economy will benefit them. There could even be a possibility of them being acquired by a US company.

Kind of a niche in the meat market. A really good, well-managed company. There has been a significant uptrend in the last 3 years, where it has been testing different resistant points and support levels, and is staying in a band. He would continue to hold for the next 1-2 years.

They’ve done an incredible job of transforming their business from 25-26 plants across Canada down to 5-6 and have become much more efficient. Margins have gone up, and at the same time, a few years ago they sold their big position in Canada Bread to a Mexican company and got a lot of cash, so their balance sheet is a fortress. Have no debt and has $300 million cash, so are in a good position to either make an acquisition, increase the dividend, buy back shares, etc. Still trades at a discount to some of its US peers. Feels that ultimately a big US company will make a bid for them. Dividend yield of 1.19%.

(A little worried about the markets in the short term, and wants to give viewers some things that won’t have too much downside if the market trades down.) There is some upside in this in the short term in the next two quarters. They spent a lot of money over the last couple of years on plant optimization, so he expects margins to expand on that. At the same time, lean hog pricing has been cut in half and decimated, which will help margins for the next two quarters. Pristine balance sheet which would allow them to do an acquisition or buy back stock. Fundamentally, financially and technically he likes it, and can see it as an easy $34-$35 stock. 1.15% yield is a little bit small for a traditional dividend investor, so you can Sell a $34 covered call out to January, which will give you an extra 2%, plus a 9% upside in the stock price.

A nice steady company for what could be a rocky market environment. The dominant company in Canada for branded protein products, pork, bacon, etc. Has gone through a massive transformation over the last 5-6 years. They’ve gone from 20 some odd manufacturing facilities, down to 6, which has helped margins increase substantially. In an enviable position with a very strong balance sheet. Sold their stake in Canada Bread a few years ago, and as a result have $300 million in cash on their balance sheet, and no debt. This gives them the ability to probably deploy $800-$900 million of capital through acquisitions, share purchases and dividend increases. If they do that, the valuation discount, versus some of its US peers, will close. This is a business that is going to continue to see margin expansion. Dividend yield of 1.6%.

For a long time he was not a fan of this company, and for a long time it wasn’t a good investment. They have finally been able to get the right assets together and it is now working. Longer-term it is probably not a bad deal. Wouldn’t get into a right now as it has had a good run.

(Market Call Minute.) Had been a Short for him for a long time, but thinks they have turned the corner. Had a big beat in the recent quarter.