Maple Leaf Foods (MFI.TO)

(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.

They just restructured and realized the value of Canada Bread. He is curious to see what the next steps are. It looks like a fully valued stock at this point.

(The background of the 3 top picks is that they are dividend paying stocks.) 1.33% dividend yield. The largest consumer meat and protein products company in Canada. Earnings are expected to grow from $0.54 in 2015 to $1.06. Trading at .95X enterprise value at trailing sales. Forecasted ROE is 8%.

Likes this company. Sold their 90% holdings of Canada Bread to a Mexican company. Have taken the cash, paid down a lot of debt and have started to buy back some stock. There is speculation that going from 20 manufacturing facilities down to 5 will be a real benefit to their margins and will start to return some of that cash to shareholders.

A big buy back yesterday. It is better than it has been. Meat packing has been a very low margin business. He is not enthusiastic about the company.

(A Top Pick Feb 21/14. Up 46.14%.) The reason it has performed so well is that they had the big stake in Canada Bread, which they sold to a Mexican company for about $2 billion, which they used to pay down debt. Now sitting with $500 million in cash. Packaged and meat processing is improving. Margins are going up and there is an expectation that they could institute a dividend or share buyback.

The whole consumer space has been exceptional. He couldn’t say that this one is a bad idea. One thing he does like is the recent break out. Chart shows a long base from July on, which was quite good. Against the TSX, it ranks quite well. Hitting an all-time high.

Sold its most profitable division, Canada Bread, earlier this year. They have their meat division which has always been marginally profitable at best. Sitting with a pristine balance sheet and $500 billion in cash. The issue with him is what are they going to do with that cash. The company has not been a great acquirer of businesses in the past. To him there doesn't seem to be tremendous value here.

He is favourable on this from an M&A perspective. Felt there was a significant amount of value to be had in the event they were able to sell their bakery business, which has been done. Have a bunch of cash on their balance sheet. He is a little confused because he thinks the market is giving them too much credit on their ability to turn around the protein business. That is yet to be seen. Easy money has been made, but on the upside you are looking at $21-$22.

Has just undergone a major restructuring, pushed by a hedge fund. Sold their best asset, Canada Bread, the only real profitable part of this company. The meat business that is left is certainly a large business, but has struggled to make money for a number of years. Commodity-based businesses are very tough businesses.

Profile has changed quite a bit since completing the sale of Canada Bread. It is now a protein focused company that is in the midst of a big restructuring with lots of cash on its balance sheet. The question as to whether they have been successful in turning the protein business around is still out there. Next quarter will be very, very volatile and he thinks disappointing as you won’t see as much progress as some investors might want to see. In the event the stock pulls back because of disappointment that they are not restructuring fast enough, would create a buying opportunity.

Sold Canada Bread, which was a good thing. Have 5 new plants that are coming on stream plus their 6 older plants, which should improve efficiencies. A big part of their business is on the protein side. There is also the epidemic in pig that is running pretty rampant in the US. It is pretty much the piglets that are getting hit so there is great diminishing potential bacon in the future through the US market. Pork prices have gone up, which is a bit of a cloud on the horizon. If you can get this under $15, it is probably not a bad buy.

He was adding on. Owned it for a while. They recently sold Canada Bread so are set to get a huge amount of cash in so they can pay down all their debt. Almost a third of the company will be in cash. They can acquire or buy back shares which they have suggested they would do. Recent capital expenditure should lead to margin improvement in the business. Then they might put the protein business up for sale.

(Market Call Minute.) Sold their 90% of Canada Bread and got a fair price. They want to concentrate on their core operations. Thinks they are heading in the right direction.

(Top Pick Nov 1/13, Up 6.98%) The near term catalyst is the announcement of them selling their bakery business, Canada Bread. He believes the buyer is the extremely logical one. These businesses come up for sale once every 100 years. Restructuring continues in the protein business. The talk of ability of increase margins is overdone. They have to sell the protein business right after the Canada Bread sale.