The markets have been doing well, and investors are keeping a close eye on this week’s earning reports from a great number of Canadian large-cap stocks. Cannabis giants Aurora Cannabis (ACB-T), and Canopy (WEED-T) are both reporting their earnings this week. Other big names this week include Canadian Tire (CTC.A-T) , Shopify (SHOP-T) and, Telus (T-T) as well as Bombardier (BBD.B-T).
Here are the companies on Stockchase that are reporting earnings this week:
Aurora Cannabis (ACB-T) Feb 11
He saw the bubble coming in cannabis. Take a look at the financial balance sheets and see how much money they owe. He owns one company in the space that also owns liquor stores. You will see more companies go under in this space. He only buys companies that have been around for 10 years.
(A Top Pick Jan 30/19, Down 4%) He would have expected it to do more. He is quite confident going forward. He thinks they will get taken out within 18 months. Almost made it a top pick again.
SQI Diagnostics Inc. (SQD-X) Feb 11
They make life easier for large diagnostic test companies. It automates the testing process. They did a final financing. They've been working on this technology for 5 years.
Inmed Pharmaceuticals (IN-T) Feb 12
This is another company in the cannabis space. This is not a cannabis producer, it is a company that adds value in that space. They are mapping cannabinoids, looking for different formulations to treat different diseases.It is highly speculative, but he thinks there is opportunity for this type of company. He likes the management. In…
For years NEPT was in partnerships where they were extracting Omega-3 oils from krill oil and selling that to consumers. Now they're taking that extraction technology and applying it to the cannabis oil market. He's in a wait-and-see spots. The fundamentals don't back the move up in the stock. He has a small short on…
Canopy Growth Corp. (WEED-T) Feb 14
They each have their own strengths. He would pick Canopy (WEED-T) because they are the 800 lb gorilla. Aurora has lots of news about balance sheet challenges but they have low costs that he thinks will still come down further.
CRT.UN vs. CHP.UN Choice Properties is the largest Canadian REIT. Strong management. Good pipeline, so no shortage of growth. Working to reduce leverage. Nothing wrong with it. Great company. Fairly valued, so better opportunities elsewhere. She prefers Canadian Tire, mainly on the valuation. More short-term upside.
United Corps. (UNC-T) Feb 11
Clarke Inc. (CKI-T) Feb 12
(A Top Pick April 25/16. Up 16.15%.) A small investment management firm. Historically they have done very well in investing in both public and private oil companies, and buying and selling assets. They delivered a special $2 dividend to shareholders in June. He is a little less bullish on this now. Trading at a slight…
The multi-dwelling residential REIT space has been shooting up in markets like Halifax, Quebec and Toronto. KMP is making new developments. He likes this, but it's too expensive. Tailwinds (geographies) are working for KMP.
(A Top Pick June 1/17, Up 12%) A great manager. Out of Alberta with very good western properties. He sold during its recent highs, but still likes it.
He likes it for being in multi-family rentals. It's challenged because it's controlled by Morguard Corp. Diversification is 43% in Canada, 57% in Canada. Nice dividend. Probably worth $22/share. But there's better value elsewhere like CAP REIT or BSR.
As the stock has not dropped 33% in the last year and have 100% upside, he is not interested as a Contrarian.
He is a big fan of this company and likes their management team. Their own risk management tolerance is low. A lot of buildings in Toronto and Vancouver, but they also hold office space in tight markets. They find older buildings and turn into nice new spaces. The balance sheet is healthy.
Atrium Mortgages (AI-T) Feb 13
Not on his target list. It trades at 14 times earnings -- pretty cheap. The balance sheet is a little more levered than he would like. Earnings growth is not great. If you think interest rates will not change and remain low, he would prefer others. A quality name though.
A large company in commercial real estate. Barely pays a dividend, but offers an 11% free cash flow yield that's and growing 91% YOY. It trades at 8x trailing cash flow and boasts a big 25% return on capital in Q4. Earnings to grow 11% in 2020. (Analysts’ price target is $107.83)
First Capital Realty (FCR-T) Feb 13
Likes it even though he's not positive on retail. They own some of the best Canadian retail in Canada. Pays a 4.5% dividend. Owns some of the best Canadian retail real estate--a niche of grocery stores and pharmacies which are stable and sell necessities. Super managers. The overhang of the previous owner is fading. They…
Manulife Financial (MFC-T) Feb 13
Chart shows a double-top of $27. Insurance looks good. Nice upward move since start-2019 in MFC. He doesn't know the fundamentals of MFC, though it got hit hard today in the global sell-off. He owns other insurers including Sun-Life.
Apartments in Ontario and the US sunbelt. MRT is pretty illiquid, but has performed very well. She'd rather play Ontario and the sunbelt separately (i.e. Minto REIT for Ontario). They have a decent balance sheet so they can continue to pay debt and grow by acquiring. No headwinds here. Expect higher dividends.
Smart REIT (SRU.UN-T) Feb 13
This is a high quality, well managed company looking at re-development opportunities. He would not hesitate owning this one. They will make the best use of their properties down the road.
RY vs TD vs SLF? He owns both of the banks and he prefers this space over the insurance sector. RY has a stronger approach on the wealth management side, whereas TD focuses on retail customers and has a larger presence in the US. Right now he would favour TD. Canadian banks of been held…
TMX Group (X-T) Feb 13
They have a temporary CEO. The company is in the middle of transforming its business to add data and information technology. The stock has done well and it was one of the best performers in 2019. The balance sheet is good. He expects better things in 2020.
If you've held it for the last couple of years, maybe it's not a bad time to take some profits. For him, cashflow is what is important for him. It is one of the core holdings for his portfolio at 5%. Infrastructure and REITs are well-hedged for any interest rate disruptions.
Fairfax Financial (FFH-T) Feb 14
(A Top Pick Sep 12/19, Up 2%) He still thinks Prem Watsa will deliver. FFH has a global reach and long-term commitment to India. $540-600 band is supportive, but he's looking for upside above $600-620. If so, this could go to $800.
Populated by public and private investments in India. One stock he would tuck away for 10 years. India is the largest democracy, and corporate tax cuts have been encouraging. Fundamentals are looking great for India.
The stock has not gone anywhere and you are only getting dividends. He would look elsewhere like CAPREIT that has better organic revenue.
Rifco Inc. (RFC-X) Feb 14
Most recent quarter was a great one. ROE was 28%. With all the stuff that is happening in the marketplace right now, there are a lot of concerns about Alberta specifically, and you also have a lot of concerns about financials. Thinks they put in a great quarter. To be a buyer of the stock,…
Chance to double? He is not surprised to see it down 40% on the year. The capitalization makes no sense to him -- although he admits to not being to familiar with their balance sheet. He thought this was a good short a while ago. They have done well, but the price point for their…
He owned the stock at one point. It is a cash cow. It is mostly a marketing company. The question has always been if the parent will privatize the company. They pay a good dividend but there is very little growth. Hang on if you are in it for the long term.
He doesn’t know the seasonality on this, but the technicals show that it has been in an upward trend for quite a period of time. During the last little while, it has been in a trading range between around $19 and $22. It is not unusual for a lot of stocks in the consumer staples…
We have seen a bit of a pullback but we are in the seasonal period for them. We are at a support level from a couple of years ago. They had a couple of operational issues on the Tim's side. He thinks it looks good from a technical perspective. Burger King is a well run…
Yellow Pages Ltd (Y-T) Feb 11
It's gone sideways with the meatless burger and a brilliant ad campaign, but competitors have caught up a lot. He owns a little only. It doesn't trade in big volumes though. He'd still buy it. They have good locations in places like airports. Pays a good dividend. A long-term investment. Also, A&W is conscious of…
Iconic Canadian brand but operating in a very competitive space. Most products are AMZN-Q'able. They have the credit card business which brings in 25% of their earnings but it is essentially sub-prime lending. Loan losses are skyrocketing at a time when bankrupsies are skyrocketing. It is not timely from this perspective. They have been buying…
(A Top Pick Mar 13/19, Up 5%) OK company, cheap. 11x earnings. Competition from Amazon. But people still go there. Sportcheck is doing well. Stick with it. It will continue to do well despite e-commerce.
D-Box Technologies (DBO-T) Feb 14
It is getting pounded by tax loss selling. They have very valuable IP and a good installed base. It is worth more than it is trading for and he is urging the board to unlock some of that value.
Doesn't know this company. Loves the space. Names with a good name, like "green" move well. They produce organic foods, and people are looking to eat healthier. Fancy name. Fancy products.
Input Capital Corp (INP-X) Feb 14
They do canola mainly. At these prices the stock is so cheap. He sold because he was not seeing enough capital being deployed in Canola streams.
🛢 Basic Materials
Canfor Corp (CFP-T) Feb 11
Lumber prices and stocks were under a lot of pressure last year. Today you have strong US housing and demand. This is an attractive entry point. A bid to take it private was withdrawn and the stock dropped. (Analysts’ price target is $16.38)
Canfor Pulp Products (CFX-T) Feb 11
Seasonally, forest product stocks have a history of reaching a peak around the 3rd week in April. This year is no different. Probably an opportunity to take some money off table.
First Cobalt (FCC-X) Feb 11
Cobalt is attractive but this is not a cheap producer, because they're in Canada and not Russia or Congo.
Orvana Minerals (ORV-T) Feb 11
He owns it around these levels. They have mines in Bolivia and Spain and looking to acquire in Argentina. The property they just bought has costs of $500-$650 per ounce of gold. He is concerned about the revolving door on management. He does not know where gold prices are going to go. He will continue…
Belo Sun Mining (BSX-T) Feb 12
He sold it. They operate in Brazil, but let's see where political changes go there; things can get nutty down there once in a while.
Lion One Metals Ltd. (LIO-X) Feb 12
Fiji is an interesting place. They have raised $85 Million last year when it was tough. If they get this thing going it will build up confidence. They are putting a relatively small scale gold mine into production while doing exploration. They should eventually get bought out.
There is no dividend. Sales are up but earnings are less negative rather than positive. Earnings growth forecast for this year is zero.
Taseko Mines Ltd. (TKO-T) Feb 12
This is on his watch list. He is not familiar with their fundamentals. Today's earnings release will help define their future.
West Fraser Timber (WFT-T) Feb 12
Doesn't buy forest product companies as they're very cyclical. Pricing is sensitive to demand. Cyclical sectors are out of favour as we're late in the cycle, and economy is soft.
7.4% dividend and it is not safe--a 540% payout ratio. Lumber prices seem to have bottomed this year and should rise. Will WEF maintain the dividend? Free cash flow is negative. 4 cents of earnings in 2020, rising to 11 cents in 2021 is his outlook. Ranks near the bottom for him.
Acadian Timber Corp (ADN-T) Feb 12
Lumber company with a good dividend and low payout ratio of 70%. The dividend looks safe. He does not expect a lot of capital returns. There are some cyclical risks with housing markets. There are 45% owned by Brookfield. A good income holding. Yield 6%
Barrick Gold (ABX-T) Feb 13
(A Top Pick Feb 11/19, Up 37%) Gold has leaps to go and government balance sheets are not getting any better for sure. The US president is getting more desperate to get re-elected and to would want to inject more value into the currency. Inflation is low. But cost of living in many US cities,…
Market is saying dividend is not sustainable. Fair amount of debt. Payout ratio 100% plus. Its commodities are not doing well. Hurt by issues with fracking and in China. Yield is 13%.
Kinross Gold (K-T) Feb 13
The earnings were good. He just doesn't like these big companies. He has done better with the other producers. He would go with Agnico that presents a better value. (Analysts’ price target is $9.25)
A smart group of guys. They are putting a fair bit of work into proving their concept is right. They seem to be backing up their thesis. It is looking like it is working so far.
There were a couple of subtle things went on with the trust conversion which discouraged a lot of investors. An illiquid stock. Most of their exposure is in B.C. and Alberta where housing is still very strong. Thinks we're at the peak of a cycle so don't have it as a long term hold.
Highly cyclical industry. Need improvement in underlying commodity prices for the price to get back to mid-20s. So Chinese economic growth has to rebound and strengthen. Even with the price decline, she's not interested.
They hold Quebec assets. They just reported a quarter that blew away expectations. The iron ore price has bounced back, and CIA produces high-grade iron ore, so they fetch a premium price. Also, transporatation costs have declined in the last month. If China comes back into the fray, CIA will enjoy huge growth. (Analysts’ price…
A risky stock that’s driven him nuts. He bought it around $10.96. It’s finally breaking out. Copper stocks could do well although his exit price is around $11 which could move up depending on how it performs. (Analysts’ price target is $15.47)
Goldcorp Inc (G-T) Feb 14
Lundin Mining Corp. (LUN-T) Feb 14
The risk/reward is fairly good. It had a good week last week and has been trending upward lately. Base metals enter seasonality in March. Has a seen a good upward trend since late 2018. A fine long-term holding. Has an excellent balance sheet and its revenue, EPS and EBITDA blew away all expectations. (Analysts’ price…
New Gold Inc. (NGD-T) Feb 14
Doesn't think there will be a take-over soon. The CEO used to be the CEO of Richmond Mines. They now have an operator. On their watch list and he has confidence in management.
Usually silver will lead gold by a little bit. Everything in silver right now is looking really, really good. Chart shows a downward pattern, but has reached the upper side of the channel and should be breaking out anytime now, and do quite well through to mid-March and maybe April, depending on the whole complex.…
Winpak Ltd. (WPK-T) Feb 14
Their customer base is the food industry and it does not grow that much. This company can only grow when they make acquisitions. There is nothing wrong with it but there is not enough upside to buy. It is a good company.
Yamana Gold Inc. (YRI-T) Feb 14
If you buy just YRI you have jurisidictional risk (i.e. a country can change the royalty suddenly). Also YRI has had a pretty good move. Buy GDX instead, an ETF.
Goldmoney Inc (XAU-T) Feb 11
He rarely talks about Gold. He thinks it is a strong sector bet. It is been out of favor for so long that mines have closed, productions have closed, mergers and acquisitions happened. Central Banks are now massive buyers of Gold. they want to get out of the US dollar. The Fed is not raising…
A growth by acquisition story. He sold in the Q4, though he wishes he still owned it. There's no big catalyst for this stock, but it will continue to perform.
Shopify Inc. (SHOP-T) Feb 12
A hard one to call. Based on valuation it is at nose bleed levels; however, they are still growing the business and are one of the biggest employers of tech in Canada. It is hard to see a huge plunge for them. They should be able to continue the momentum.
They recently had a joint venture with Baker-Hughes (BHGE-N), where Baker Hughes is co-marketing one of their products. It would make sense for Baker Hughes to take over this company. Schlumberger (SLB-N) is the only company with a competing product. (Analysts’ price target is $9.50.)
CGI has been on a monster tear. There are rare non-commodity, utility or financial companies. There is a premium on these. They missed on a quarter and organic growth is slowing. It is an acquisition story, however. He would prefer Constellation Software that they own.
They own some very valuable eCommerce platforms. There is the supply chain business platform and one for businesses to interact with suppliers and consumers. (Analysts’ price target is $7.80)
Sierra Wireless (SW-T) Feb 13
He follows this, but does not own it. They just reported an earnings miss. He does not see their business model panning out on the financial statements. Now trading under $12, he expects more downward pressure.
Tucows Inc. (TC-T) Feb 13
A definite lid at around $85 and recently broke through. From a technical perspective that is very bullish. The chart looks pretty good now.
Generally not a fan of the Chinese inter-listed companies. He has a Short position in this one. There are better places to be.
PrairieSky Royalty (PSK-T) Feb 11
They reported results yesterday, which were pretty much in line with expectations. The corporate decline rate is 19%, which is manageable. He likes the management team. However, with a low beta to oil price recovery, he is looking elsewhere.
TOU is too high of a natural gas exposure for him. BIR is overspending their cash flow to fill a plant they invested in for the promise of free cash flow next year. If you believe the strip pricing next year, they will generate a 26% free cash flow yield. However, it is also natural…
Cenovus Energy (CVE-T) Feb 13
Tag Oil Ltd. (TAO-T) Feb 13
(A Top Pick April 23/13. Long Tag Oil (TAO-T) and Short Imperial Oil (IMO-T). Down 42.51%.) Did an equity issue last fall at about $4.40, which the Street didn’t like. This is a New Zealand oil/gas play and they have about 5 or 6 catalysts coming up in terms of major wells.
Encana Corp (ECA-T) Feb 14
Weakness in share price recently is related to their moving HQ into the US. Their strategy for the move is to trigger share buying in the US as they become part of a larger market index, he thinks. There is no guarantee this will happen in the US, so this is a pretty risky strategy.…
Inter Pipeline (IPL-T) Feb 14
The yield is at 7.9%. His strategy with pipelines is to play against the yield. They are basically monopolies. Anything that is built has good leverage. He trades to maintain cashflow. They are safe investments.
Precision Drilling (PD-T) Feb 14
There is a base level of activity to just maintain production. The stock price is already demonstrating a poor drilling season outlook. They could privatize the company in 2.5 years on current cash flow. An outlook for $60 oil will lead to an uptick in drilling activity from here. Yield 0% (Analysts’ price target is…
Superior Plus Corp (SPB-T) Feb 14
An income name that pays 6.1% that's sustainable and growing. He likes the fundamentals. (Analysts’ price target is $14.60)
TransCanada Corp (TRP-T) Feb 14
Core holding. Trades at 18x earnings. 5-6% in both earnings and dividend growth. 30B worth of projects being built, and another 20B to come. Yield is 4.26%. (Analysts’ price target is $73.85)
Ceres Global Ag (CRP-T) Feb 12
(A Top Pick April 3/14. Down 12%.) A fully integrated agricultural company with a railroad to their elevators along with production of legumes and wheat. Thinks it should deliver quite nicely this summer because of what is going on in California. Feels drought is going to haunt us from a food inflation perspective.
This is a funny one. The book value is $4.80. They started a few more projects in China. It is not for him, but he can see why somebody would like it.
Waste Connections (WCN-T) Feb 13
(A Top Pick Apr 01/19, Up 19%) A commodity space but it is well managed. The management team has been there since 20 years. They have owned it since the acquisition of Progressive Waste Connections. They are great at acquisitions and they convert cashflow to free cashflows. It has had 17 years of positive shareholder…
Bombardier Inc (B) (BBD.B-T) Feb 14
Since 2000, they have had negative free cashflow. They have been unable to generate enough cashflow to cover capital expenditures. Things have gotten more expensive along the way and the debt load is weighing down. Most of it is coming due in the next 3 years. They have sold off most assets that they could,…
Toromont Industries (TIH-T) Feb 14
The long term price chart is amazing. Management has been very disciplined. It comes down to how you feel about the economy as this is a cyclical company. His view is that fiscal stimulus will be forthcoming, so his view would be positive. A good name to hold over the long term.
Telus Corp (T-T) Feb 14
Significant equity offering. Will have lots of 5G spending in next 3-4 years. Dividend is safe. Will continue to increase dividend, though dividend growth is slowing as with all telecoms. Yield is 4.5%.
Use this list wisely to identify buying opportunities.
Happy trading !!!