The Panic-Proof Portfolio (Stockchase Research)Superior Plus CorpSPB.TOTOP PICKMay 11, 2023

Propane is more volatile than natural gas, highly dependent on weather, and faces lots of seasonal margin pressure. A positive is signing a data centre contract in the US. Is a stable, not bad, business, but too volatile.

Earnings last week didn't deliver and shares dropped 18%. There's a management credibility issue. Is a show-me story.

Moves propane and other fuels around Canada and the US. Essentially a logistics business. Guidance changed from 10% in US to negative 5%. Efficiency program hasn't worked as expected. Interesting, but wants to see it deliver.

Recent acquisition got them into compressed natural gas and renewable nat gas. Belief is that propane has matured, but alternative energy is emerging as a growth area. Erratic earnings. Plunged substantially. 

Total compounded shareholder return for a decade is just over 1%; over 20 years, it's 0.5%. You're trading income for capital. Yield is ~2.5%.

Quebec gets really cold unless they have propane to keep the lights on. Really stable, consistent income business. Distribution includes all over the US. Bought compressed natural gas business. Got stopped out, then reloaded to their income mandate around $6.

Dividend wasn't sustainable, got cut. Game-changer for him, as now this name offered value (instead of income). Analysts are now starting to reward that decision. Very good footprint feeding into long-term energy demand.

Strategy was to get bigger in Canada and US propane distribution, and he liked that. Didn't like the payout ratio of 80-90%. Certarus acquisition wise. Balance sheet couldn't support all its big plans. Dividend cut a positive, and should free up capital.

Widespread team turnover since the acquisition, so it'll take him some time to get familiar with new management. Some reasons to be optimistic.

Watch this because shares have fallen far and Brookfield is involved with them in a serious way. Watch their next two quarterly reports.

The shareholder base has probably rotated by now away from yield investors. The problem is that it has high debt and a high valuation, yet growth is not that great. Weather is also a factor and competition has increased somewhat. Yes, EPS is expected to show good growth in 2025, but even with a good bounce EPS will be lower than it was in 2013. We think management did the right thing with the dividend, but we still think buyers can wait here. 
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He's looking for a good entry point. Cut dividend, which was long overdue. Now looking at more share buybacks, a good thing. Valuation is really attractive. Strong fundamentals going forward. Not a dividend play, but a good opportunity for growth. Yield is 3%.

It is hard to like a stock that has cut it dividend by 75%. Weather (milder winters) is an issue for companies involved in the heating business. Its revenue base is not growing as fast as before. The stock has done nothing for a long time. It's interesting that15% is owned by Brookfield.  Propane is a very necessary product.

Disappointing. Brookfield owns a lot of this, and he thinks they see a recovery coming. Shares are down because they are paying off a recent acquisition. Stay the course but watch the next few quarters.

SPB has been very disappointing. It has a shareholder yield of 16% (11% dividend yield, 4.4% debt paydown, and a 0.5% buyback yield). Analyst estimates have largely been trending lower, but forward earnings growth is expected to be strong, but some of this is reflected in its forward earnings multiple of 17X. It is a cyclical business, and we will be watching the earnings release next week very closely to further assess at that time our full review of the company going forward. 
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Never impressed with it. Needs to evaluate it more on the current pullback. Not an investment, but a trade at best.

Valuation probably attractive enough to add now as a value play. Seasonally, expects demand to improve. That being said, have to be careful of the high yield, as it can disappear. Can't say dividend is rock-solid. Yield is 9.5%, some risk.