Transcontinental Inc. (A) (TCL.A.TO)

(Top Pick Jun 21’16, Up 39.78%) Everyone threw in the towel in that they couldn’t recover from being just a printer. They reduced costs and footprint. They are selling off activities in Eastern Canada and this is to go to better margin business. 3.3% yield.

The market assigns a very low valuation to this, because the general view is that print is in secular decline. According to management, this company’s major line of business is printing flyers for retailers, which is 65% of their business. The rest of it is newspapers and outsourcing printing, and they are the last man standing. They are also in packaging, a much higher margin business, and it is not appreciated by the market. Very strong cash flow. Dividend yield of 3.51%. (Analysts’ price target is $22.65.)

As a printing business, they have been discounted because of their exposure to packaging. They have always had a historical low multiple, compared to their peers. While print is in decline, this company has done a very good job of stabilizing their income. Dividend yield of 3.34%. (Analysts’ price target is $21.19.)

The more immediate opportunity with this company is the shift, where they have gone from printing to packaging. With everybody doing everything online, printing is less important. However, packaging is still important. On a valuation basis, the stock still looks good, and you do get paid a good yield.

(A Top Pick Nov 10/15. Up 6.36%.) Recently had a good quarter. His reason for choosing this is that it is a cheap company, because the main printing business cycle has declined. They have gradually transitioned themselves to flexible packaging and continue to manage the base business very well. He continues to like this.

This continues to trade at single digit multiples. Great cash flow and good dividend. The printing business continues to decline, but they manage to slow it down very well. Meanwhile, they take the cash flow and reinvest it in the higher growth, flexible packaging business, for pharmaceuticals, food, etc. They are making a lot of progress, but it has been uneven, but has started to show in the last couple of quarters. If they can continue to do that, it could be a double from here. Dividend yield of 3.45%. (Analysts’ price target is $21.19.)

(Top Pick Nov 25/15, Down 14.24%) It is a good lesson in cutting losses. Don’t stick around and let your losers turn into disasters. Cut your losses and let winners run. He still has a small position just because it is so cheap.

Likes this quite a bit, because it generates quite a bit of free cash flow. He is sharpening his pencil and starting to look at it quite closely. They have a traditional print business of magazines, which continues to be difficult. However, they have been investing in packaging, which is a good part of the market for them to be in. Thinks it is going to do okay and that there is upside from here. Valuation is excessively cheap. Management is eventually going to switch from a print to more of a packaging. You are okay in this name.

He is impressed with this. They have taken their plants down from 50 to something like 21, and at the same time, improved their margins dramatically. A cash flow generating machine, and they are using their cash flows to get into flexible packaging. He likes the story and what they are doing.

(A Top Pick July 28/15. Up 32.9%.) A traditional printing company that has transitioned into the new product mix that is for the future. Still sees a lot of upside in this.

Somewhat volatile. If they have a bad quarter, the stock could check back 10%-15%, so you have to have a bit of a stomach for that. The dividend yield of 4% helps to make up for that. They have a lot of companies in the old business of printing, which is slowly decaying, but that is why it is trading at such a cheap multiple with such a good cash flow. Meanwhile they are reinvesting in a new higher growth business, and over time that should get much more dominant with much higher multiples.

A legacy business in publishing, printing newspapers and flyers, etc. That business is in secular decline. They are trying to avoid that by making acquisitions and trying to get into labels and things a little more sophisticated. They haven’t demonstrated an ability to grow earnings. He would steer clear of this.

Printer. The news paper industry is maturing so they diversified into flexible packaging. 5 times cash flow, 8 times earnings. Decent 5 year dividend growth rate.

This has done a decent job of transitioning from an old line printing business and into packaging. They haven’t fully completed the transition, but as they do it will be awarded a higher multiple over time. Printing is in secular decline, and for a long time the stock has traded at pretty depressed valuation levels. However, over the last couple of years, people have become a little more interested in the company as they have gotten more into the packaging side of the business.

Technically this has a pretty mixed picture. Chart has a triangle pattern. It has recently underperformed the market, which is not a good sign. Momentum indicators are turning down. Wait until it is breaking above the triangle. If it does that, then you can get a measured move based on the perpendicular line, which will give you an idea of what the target will be.