Toromont Industries (TIH.TO)

They own TIH to play the infrastructure theme. Largest Caterpillar dealer in Canada, with great stream of recurring, high-margin servicing revenue. Also benefits from some AI data centre infrastructure spending. Great management.

It's run up, with a lot of positive expectations priced in. Still owns, but at a moderate position size.

The market cycle model is essentially the business cycle with its 5 different phases. Phases 4 and 5 are the contraction phases, when you typically see the stock market coming under pressure. Phases 1, 2, and 3 are the expansion phases and they typically last a year. 

His team believes that last year was phase 1, so now we're in phase 2. This matters because industrials typically do well in phase 2. They're bullish on industrials generally.

Is a lot of excitement baked into this stock and its peers, given the big building projects that will happen. The PE is too high, so would wait for a pullback. The big projects won't happen until later that some expect, he thinks.

EPS of $1.52 beat estimates of $1.49; revenue of $1.37B beat estimates of $1.35B. EBITDA of $248M beat estimates by 13%. Sales rose 1.2% but operating income did fall year over year. Tariffs are causing some customer uncertainty, but investors seem to have taken this in stride and with these results we would not expect anything different. Good numbers, but not great numbers here. 
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Is a catch-up trade that will test previous highs around $132. If we are starting a new cycle, copper will benefit. The chart shows higher highs and higher lows, but consolidation lies ahead as the USD rallies.

Long-term wonderful company. Very little debt. Sells, rents, and leases equipment. If economy slows, can fall back on revenues from servicing equipment. Increases dividend ~10% a year. A stock with a lot less volatility, which can grow slowly over time. Decent time to buy right now.

His 3 Top Picks today are based on ROIC vs. WACC. As inflation and rates go up, things will get tighter. But this company can still generate ROIC (12%) higher than WACC (9%). Even if urban construction slows down, the resource sector is picking up (gold prices are up, so miners are demanding equipment). Yield is 1.74%.

Reasonably well-tied to commercial construction. Fantastic job dealing with uncertainties. Likes the business and management team. A bit too big for him, as it's about to exit "SmallCapLand". If you own, decent time to add.

Great company. Looking at the 5- or 10-year chart, just chugs along from bottom left up to the right. If you own a partial position, definitely think about adding. Dividend's grown significantly over time by ~12% per year for 5 years. High quality, very well run.

Cash is building up on balance sheet, so he expects an acquisition over next 1-2 years. They have refrigeration technology, and solid penetration in Eastern Canada, so have to see what the next leg of the stool might be.

Will always depend on east of Manitoba, as that's where their businesses are. Makes money on both rental sales and maintenance, so $$ comes in at a regular pace. Recent acquisition in southwestern Ontario, but additional ones will be difficult because they dominate eastern Canada.

Likes that they generate so much FCF, they can just buy back shares, increase dividend, or go private. Virtually no debt, a few BBB bonds outstanding.

Great compounder over the last decade, when they benefited from growth in the Ontario economy. Seeing softness in the space. Park in your portfolio and hold it for the long term. Does trade at a higher multiple. 

Chart appears to be range bound. Would recommend a small position, or watching for leg ups. 

The structural backdrop includes a lot of spending on construction and on US manufacturing facilities. Much better supply/demand for energy and materials than we've had in a decade. These are all customers of FTT.

If you look at the performance of CAT, FTT and TIH over the last year, all look very attractive. TIH does more construction, whereas FTT does more materials and so he'd lean more toward that one.

It's been stuck in consolidation for 3 years, failing to break above $110 a few times. If it falls back to $100, it could be worth a trade. Otherwise, he's cool towards it.

The question was on his preference between Toromont or TFI International. Although Toromnt is good he prefers TFI which has been a great stock and huge performer. It has great management which has deployed capital very well and made smart acquisitions. There is more upside.