Metro Inc (A) (MRU.TO)

He really likes food stocks. Thinks there is space to grow, and he still sees some upside in the sector. (See Top Picks.)

There is a lot of talk about food inflation hurting the supermarkets right now. This area has a little bit of seasonal weakness in August. The first place he would look would be at around $39.

(Market Call Minute) Grows through buying back stock. The valuation is higher now so they will not grow as much.

This had a good quarter. They continue to do better than the competition. The only issue is that this is a defensive category, consumer staples. You have higher valuations because this has been a place to hide for the past couple of years, so he doesn’t think valuations can go much higher.

This has performed quite well. It may have dropped today because of people taking profit. The stocks are fairly thinly traded, and it doesn’t take much to affect them. This is fine.

(A Top Pick June 3/16. Up 5.23%.) Consumer staples tend to do well in the summer. Chart shows a strong upward trend from last September. The period of seasonal strength for this runs from June 20 to Nov 12^th, and tends to gain about 8.9% on average. It has been positive in the last 14 out of 20 periods.

This is a winner off the theme where investors are looking for something fairly predictable. This is a great operator and has done a great job in growing the business over time. This is one that can continue doing well.

Loblaw’s (L-T) or Metro (MRU-T)? Doesn’t think you can choose between these 2. It is sort of back-and-forth. They both have engines firing on “Go” right now. He would possibly switch out of Metro and go into Loblaw’s.

Thinks this company, Sobey’s (SBY-T) and Loblaw’s (L-T) are dealing with the same problem, Wal-Mart (WMT-N), which has become much, much better at fresh food. A good company and trading at reasonable valuations, but they are dealing with competitive threats.

This has done pretty well. They are good operators. There has been moderating square footage growth from prior years which has been beneficial to all grocery retail players. She prefers Loblaw’s (L-T) because of the drug retail component.

Scores in the top 15% on valuation and 20% on ROE. Not super cheap on an EV to EBITDA basis at around 13 times, and 20X PE. Solid operator. 1.2% yield.

Seasonally, consumer staples tend to do very well in the summer. US consumer staples are not too hot right now, but the Canadian is doing quite well. If you want an ETF to play it use iShares S&P/TSX Cap. Consumer Staples (XST-T). Between June 20 and November 12, he has an average gain of about 8.9%, and has been positive in 14 of the past 20 periods.

A very classical, traditional, consumers staple stock that provides investors with a very stable and predictable growth and earnings with a modest but growing dividend. They have $12 billion in sales and a network of 600 stores in Québec and Ontario. Trading at 17X earnings and a 10% growth rate and a dividend yield of 1.3%. The dividend has grown at 16% per year over the last 5 years. A very steady type of name, especially for this environment where things seem to be expensive.

Had owned this for a while, but the return from Loblaw (L-T) became more attractive and he switched. Both are great companies.

In food stores he is looking for not just a reasonable yield, but also for growth. Thinks Loblaw’s (L-T) gives a little more potential. (See Top Picks.)