TMX Group (X.TO)

This is a little volatile because there is not a lot of float out there. If you look at the holders, it is pensions and banks, so the amount of floating stock is very little. The valuation is much cheaper than the other North American publicly traded exchanges. Spitting out tons of free cash flow. There is potential for a dividend increase. He doesn’t view this as a financial, but as an annuity revenue stream technology company at a very reasonable valuation. His Fair Value price target is about $75. This is a show-me story and they have to deliver over the next 2 years.

The 1^st quarter has not been great in terms of trading, but this is not just a trading company. There are listing fees, advisory fees, and technology fees. Listing fees have been huge recently because there have been a lot of preferred shares and secondary offerings for oil and gas companies that need the money. He is hopeful that there will be more IPOs. Trading at around 12 or 13 times next year’s earnings. Dividend yield of 3.04%, which is the highest dividend yield relative to its US peers.

He is in the middle of researching this. Hasn’t owned it lately because he was very concerned about the fractionalization of the stock market. The old monopoly of 1 stock getting all the business has eroded. He is more attracted to it at this price than he was at $60 a share.

Came off its peak mid-2014 and dropped down to an area where there were a couple of peaks. Looks interesting. Some indicators are up and some indicators are down. There is no rush to go out and buy this. Around $46 would be an interesting area. Really a non-issue now.

3.25% bonds maturing Oct 3/18. One of the themes in his 3 picks is quality. He is taking cautionary measures to guard against BBB bonds starting to underperform the market. Also, preservation of capital in these very low rates is #1 in his mind.

(Market Call Minute.) Kind of a sleepy stock. Doesn’t see any compelling reason to buy this.

Chart shows a nice upper trend from mid-2011, which is moving higher. There was a peak in 2013 and another this year. This is not a perfect double top. Certainly an area where it caused some sellers to come out about a year and a half ago. You may have that happen now. You don’t want to see it go down to $55 because that could bring it down to the $45 range. Expects weakness in the near-term.

CEO is stepping down. He is glad of this as he was very disappointed in his reign. Would like to see this company get reconnected to the Canadian financial industry. He thinks it should be an absolutely integral part of the Canadian financial scene. Hopefully we’ll get someone who is more interested in growing the TMX in the context of a growing Canada. Not a great stock at this point in time to invest in and there is better value in the marketplace. The exchange world has changed. Easy money in this area was made 7-10 years ago.

If we think equity markets will do okay, exchange companies will do just fine. He would prefer to look outside of Canada because Canada’s makeup on the index probably is likely to see us underperform going forward for the next little while in the absence of a very robust recovery which might get our cyclicals going. Doesn’t think you will get hurt in this one as he expects equity markets are going to continue to perform pretty well.

Still a play on the expansion of trade in Canada. This is the only play in the sector. Discounted to global peer group.

Is highly levered to the ups and downs of the markets. He is looking for a correction of 8-10% soon. You don`t need to sell it but there is a correction risk in the stock.

Extremely well run company. Biggest headwinds they may face are 1) declining new issuance in the mining and oil/gas sectors and 2) trading volumes softening up. Feels this has run its course for the short term for the next year or 2. If there was a pull back, he would be looking to buy this.

You have to ask yourself where the business is going over the next 5 years. The business is not growing. New listings are shrinking and volume is being usurped but some of the alternative exchanges.

He would be more included to be a seller, model $43.09. Convoluted deal. He doesn’t expect anything major to happen to the balance sheet after the acquisition. Surprised the deal went through.