Morguard Corporation (MRC.TO)

Feels the NAV for this company might be as much as $200-$210 a share this year. At $150, it would only be trading at 75% of NAV. This was a great undiscovered real estate play in Canada. Good operators. There is more to come.

Chart shows an uptrend that has been around for a few years, but the chart is breaking down. There is some potential as the chart shows a formation of a rounded bottom and could get back to the top of the trend line. He is trying to avoid stocks that have broken the big long trend lines. Has some potential for a short-term rally and could be worth a trade, but not good for a long-term trade. One of the factors that you should be looking for in a change of trends is the highs and lows, peaks and troughs.

Sees good value. Feels the NAV is somewhere around $175 as share. The risks, as with all real estate companies, are what happens when interest rates go up. Do they have to refinance their debt at higher rates and does it put a bit of a hole in cash flow? Feels those fears are vastly overstated because, when interest rates go up, that means inflation is going up which means rents can be raised.

(A Top Pick July 31/12. Up 16.35%.) This one was doing better up until it got nailed by rising interest rates. A pure play on real estate. Owns a number of publicly traded REITs as well. Very smart management. A screaming buy at $105.

This is a difficult stock to analyze because essentially they are in the REIT management business but they don’t pay a great dividend. So even though the company is making lots of money, you are not seeing it come in the form of dividends so the stock is strictly for capital gains. The REIT sector is in a bit of a transition period, going from one of the favourite investments to some questions being asked.

He continues to buy for new clients. There was a little dipsy doodle in June and he was aggressively buying it. The CEO, who owns 45% of the company, bought a significant amount of shares also. The company also bought back stock. Feels the sum of the parts is well worth more than $150 a share.

Morgard Corp is a big entity that has a bunch of pieces. He doesn’t own it. He owns the REIT. It has not recovered like some of the others. It is a little bit too big. A fine company but probably going to lag a little bit because of size.

You have to value real estate companies on 2 metrics, funds from operations (cash flow) and NAV. To him the real estate is valued at about $150-$160 a share and funds from operations are probably trading at 11 or 12 times. Has gotten a little bit more expensive, but good quality REITs trade at 17 or 18 times funds from operations. As long as interest rates stay low and there is cash on the sidelines, it will go to these types of companies.

(Market Call Minute.) Had a good run, but valuation is relatively fair. Great earnings and the cash flow is fairly significant and growing.

Expects to see some pretty decent cash flow growth. This is not a REIT, it is a real estate company with a significant ownership in Morguard Real Estate Inv Trust (MRT.UN-T) in addition to several other properties. Because the dividend is not very high, they take their income and plow it back into growth. Trades at a significant discount to NAV which he sees as North of $150.

This is very, very cheap but not very liquid. NAV is conservatively around $160-$170. Has always traded at a discount because it is essentially a holding company. There is a bit of a management discount as well as the team hasn’t done an effective job of marketing this name in the last few years. Very low yield. Good quality real estate and have added value.

Real estate in general is driven by interest rates. Very, very well-run company. Real estate space has been very good to investors recently.

Why buy a REIT that is trading at nosebleed levels when you can own a company that owns 2 REITs? Thinks the NAV is about $150 a share. Feels it is trading at a 60% discount to the REITs based on funds from operations.