Cogeco Communications (CCA-T)

Prefers Quebecor. They rejected an approach from shareholder Rogers, so it's unclear what Cogeco's long-term future. Is overlooked by Bay Street. Has lagged the TSX the past decade. Pays a decent 4% yield. But they lack wireless and entertainment unlike its peers. And they're not in the major Canadian markets.

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Has surprised investors with a good acquisition of WOW. The deal added 200,000 internet and 61,000 video customers. This has added scale while diversifying the business. Significant growth opportunities. Unlock Premium - Try 5i Free

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Their latest quarter results were good. They beat expectations on revenue and EPS. REvenue was up 8% and free cash flow rose 14.2%. No concerns around the earnings report. Unlock Premium - Try 5i Free

(A Top Pick Jun 28/17, Down 16%) It was a disappointment. It has a reasonable combination of price, price momentum and he sold it. It still has good return on equity but it missed on earnings due to a problem with integrating a new SAP system. There is always a chance that Rogers takes them in.

This is a sector they are not attracted to presently. There is slow growth in the sector and they hold a fairly high level of debt. In a rising interest rate environment it could create headwinds.

(A Top Pick July 14, 2017. Down 13%). He sold it at a loss. He thinks it might be OK to buy again but his model tells him to wait a bit longer before buying it back.

(A Top Pick July 14/17 Down 14%). This is a great example where you need to trade with a stop loss – he uses a 7-10% stop. Poor earnings, along with a pullback below their stop, resulted in them selling off their holdings.

This has done very, very well over the last couple of years with a lot of the other telecommunication companies. It has always been held out as an acquisition that Rogers (RCI.B-T) has to make to get a hold of Oakville, Burlington area. The company has continued to diversify by buying more US assets. He would Buy Rogers or BCE (BCE-T) instead.

He has nothing in particular against this stock, but look at his Top Picks. Dividend yield of 1.8%. (See Top Picks.)

When you compare this to the other cable companies it is obviously better. It has a higher return on capital and is cheaper. Technology is not going away and we are going to need bandwidth. They are cousins of the utilities. This one is at the top of the list of cable companies.

Recently acquired some US cable operations. Earnings per share were up 37%, a 4% earnings surprise. Free cash flow was up 113% year over year. Free cash flow yield increased from 6.5% last year to 10.4% this year. Trailing ROE is 21%. PE to growth is .35. Dividend yield of 2.1%. (Analysts’ price target is $82.50.)