Opinions by Paul Gardner, CFA | StockChase
1292
Paul Gardner, CFA

Partner and Portfolio Manager

ON STOCKCHASE SINCE Dec 2004

Avenue Investment Management
47 Colborne StreetSuite 300Toronto, ONM5E 1P8
T: 416.482.2004 F: 416.482.0007 pgardner@avenueinvestment.com
http://www.avenueinvestment.com/

1292
Paul Gardner, CFA

Partner and Portfolio Manager

ON STOCKCHASE SINCE Dec 2004

Avenue Investment Management
47 Colborne StreetSuite 300Toronto, ONM5E 1P8
T: 416.482.2004 F: 416.482.0007 pgardner@avenueinvestment.com
http://www.avenueinvestment.com/


Opinions by Paul Gardner, CFA


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DON'T BUY
Tricon Capital Group(TCN-T) 

November 29, 2017

Had owned this about 2 years ago. Was looking for something on the TSX that had US exposure that would participate when the US housing market recovered. This one did and he sold his holdings at $10. US fundamentals are fine. They have a lot of assets in Arizona, Florida and in the US south. He had problems with the valuation and as to where it could go further on. Not a fan, but the fundamentals are in their favour. He would rather buy something that was cheap and had some valuation protection. 2.3% yield.

REAL ESTATE

Had owned this about 2 years ago. Was looking for something on the TSX that had US exposure that would participate when the US housing market recovered. This one did and he sold his holdings at $10. US fundamentals are fine. They have a lot of assets in Arizona, Florida and in the US south. He had problems with the valuation and as to where it could go further on. Not a fan, but the fundamentals are in their favour. He would rather buy something that was cheap and had some valuation protection. 2.3% yield.

REAL ESTATE
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$11.250
Owned Owned
No

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TOP PICK

The Convertible Debenture 8% maturing 2022. Yellow media has underperformed and lost revenue and EBITDA margins, and has struggled transforming itself from Digital media. With this bond, you are getting compensated 8%-9% rate of return. Also, there is not much outstanding debt, but all their free cash flow has to go down to repay debt.

communications/media

The Convertible Debenture 8% maturing 2022. Yellow media has underperformed and lost revenue and EBITDA margins, and has struggled transforming itself from Digital media. With this bond, you are getting compensated 8%-9% rate of return. Also, there is not much outstanding debt, but all their free cash flow has to go down to repay debt.

communications/media
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$89.500
Owned Owned
Yes

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N/A
General Market Comment 

September 13, 2017

Market. The Canadian economy roared ahead of 4.5% growth in the 2nd quarter, the TSX is not participating in the global rally. By the end of the year, Canada should probably flip, and outperform a little against the US and its global peers. Global demand has reached an all-time high for energy demand for oil. We are getting close to 100 million barrels a day which is somewhat positive. The numbers for most banks were stellar despite the low interest rate environment. There is a big sale going on in the utility spaces and energy-like yield spaces, and that has to be revalued. A lot of those types of businesses, which are actually incredibly stable, are sitting at 6%-7% yields, but you have 10-year bond yields at 2%. All boats will probably lift as long as we have synchronization of global growth.

Market. The Canadian economy roared ahead of 4.5% growth in the 2nd quarter, the TSX is not participating in the global rally. By the end of the year, Canada should probably flip, and outperform a little against the US and its global peers. Global demand has reached an all-time high for energy demand for oil. We are getting close to 100 million barrels a day which is somewhat positive. The numbers for most banks were stellar despite the low interest rate environment. There is a big sale going on in the utility spaces and energy-like yield spaces, and that has to be revalued. A lot of those types of businesses, which are actually incredibly stable, are sitting at 6%-7% yields, but you have 10-year bond yields at 2%. All boats will probably lift as long as we have synchronization of global growth.

Unknown
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$0.020
Owned Owned
_N/A

Must be logged in to use chart
COMMENT
General Market Comment 

September 13, 2017

Split $300,000 into 3 diversified dividend holdings with at least 4%+? Utilities are on sale, so you would have to take one third and buy a utility or an energy name such as Inter-pipeline (IPL-T) which gives you a 6%-7% yield. If you literally gave no valuation to the natural gas and liquids business, the payout is very conservative and you get 6%-7% guaranteed. His 2nd choice would be banks which is giving you a 4% yield. There is a case to be made on REITs because of the ultimate yields, but you are probably not going to get any more capital gains out of it.

Split $300,000 into 3 diversified dividend holdings with at least 4%+? Utilities are on sale, so you would have to take one third and buy a utility or an energy name such as Inter-pipeline (IPL-T) which gives you a 6%-7% yield. If you literally gave no valuation to the natural gas and liquids business, the payout is very conservative and you get 6%-7% guaranteed. His 2nd choice would be banks which is giving you a 4% yield. There is a case to be made on REITs because of the ultimate yields, but you are probably not going to get any more capital gains out of it.

Unknown
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$0.020
Owned Owned
Unknown

Must be logged in to use chart
COMMENT

He likes this company. Real estate has headwinds, but this company has a tailwind because it is industrial. Also, they are buying assets in the US which has extensive corridors with a population base where there would be some desired locations to own in the Midwest and in secondary cities. Yield is around 5%. They are pretty good at what they do. He would like to own this, but at the right price.

property mngmnt/investment

He likes this company. Real estate has headwinds, but this company has a tailwind because it is industrial. Also, they are buying assets in the US which has extensive corridors with a population base where there would be some desired locations to own in the Midwest and in secondary cities. Yield is around 5%. They are pretty good at what they do. He would like to own this, but at the right price.

property mngmnt/investment
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$6.480
Owned Owned
No

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TOP PICK
Altagas Ltd(ALA-T) 

September 13, 2017

Incredibly cheap, and mispriced. The market doesn’t like that they made a transformational acquisition of WGL, the US utility. It is going to have to go through a year’s worth of regulatory reviews, but it will double their earnings, and effectively their yields and dividends will increase in about a year’s time. They beat numbers last quarter. Dividend yield of 7.6%. (Analysts’ price target is $33.)

oil/gas

Incredibly cheap, and mispriced. The market doesn’t like that they made a transformational acquisition of WGL, the US utility. It is going to have to go through a year’s worth of regulatory reviews, but it will double their earnings, and effectively their yields and dividends will increase in about a year’s time. They beat numbers last quarter. Dividend yield of 7.6%. (Analysts’ price target is $33.)

oil/gas
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$27.590
Owned Owned
Yes

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PAST TOP PICK
Aecon Group Inc(ARE-T) 

September 13, 2017

(A Top Pick Feb 17/16. Total return 7%.) Convertible 5.5% bond due Dec 1/18.

contractors

(A Top Pick Feb 17/16. Total return 7%.) Convertible 5.5% bond due Dec 1/18.

contractors
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$17.780
Owned Owned
No

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COMMENT

Was expensive at 13-14 times to AFFO, and traded at a premium to its BV. Got hit with Calgary and over exposure to Alberta. They are reducing their Alberta office space. Industrial and retail seem to be doing all right. They are trying to grow their US asset base, and have new properties in Houston and Phoenix. About 40% of their assets are now in the US. However, in the last 3 months, the US$ has gone down. They are trying to reinvigorate their company, because they got caught.

property mngmnt/investment

Was expensive at 13-14 times to AFFO, and traded at a premium to its BV. Got hit with Calgary and over exposure to Alberta. They are reducing their Alberta office space. Industrial and retail seem to be doing all right. They are trying to grow their US asset base, and have new properties in Houston and Phoenix. About 40% of their assets are now in the US. However, in the last 3 months, the US$ has gone down. They are trying to reinvigorate their company, because they got caught.

property mngmnt/investment
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$13.100
Owned Owned
Unknown

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COMMENT
Bank of America(BAC-N) 

September 13, 2017

Your favourite US bank? Thinks this is the most compelling story. It trades at a significant discount to all the other banks, at about 8.5X BV. Their biggest problem is that they issued a massive amount of shares in 2008-2010, so their capital ratios are completely online. On a risk adjusted basis, he thinks this one offers the greatest return over the next 12-18 months.

banks

Your favourite US bank? Thinks this is the most compelling story. It trades at a significant discount to all the other banks, at about 8.5X BV. Their biggest problem is that they issued a massive amount of shares in 2008-2010, so their capital ratios are completely online. On a risk adjusted basis, he thinks this one offers the greatest return over the next 12-18 months.

banks
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$24.330
Owned Owned
Unknown

Must be logged in to use chart
COMMENT
BCE Inc.(BCE-T) 

September 13, 2017

Out of all the telcos, he likes this one. Their free cash flow yield is around 6%. Has a ton of free cash flow to either buy back or increase dividends. Fibre to the home is almost 2/3 done. The iPhone release is going to be positive for them. They have the lowest wireless attribution to their overall revenue numbers, so they have the most upside. Their biggest problem is that the wire line is decaying. Dividend yield of 4.9%.

telephone utilities

Out of all the telcos, he likes this one. Their free cash flow yield is around 6%. Has a ton of free cash flow to either buy back or increase dividends. Fibre to the home is almost 2/3 done. The iPhone release is going to be positive for them. They have the lowest wireless attribution to their overall revenue numbers, so they have the most upside. Their biggest problem is that the wire line is decaying. Dividend yield of 4.9%.

telephone utilities
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$58.250
Owned Owned
Yes

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HOLD
Boardwalk REIT(BEI.UN-T) 

September 13, 2017

Missed very big last quarter. One problem is that most assets are in Calgary, Edmonton and Saskatchewan, and the rental market there has been incredibly weak. There are signs of stabilization. The trouble is they are competing with condos, and they have large buildings. Last quarter, they came out with a significant amount of capital expenditures they have to put into their buildings. The positive is that they have a balance sheet that allows them to do CapX spending. Fantastic management and they are the biggest shareholder. Getting closer to the bottom and there is some stabilization. If you own, stick with it, but don’t buy it. Distribution yield is 5.7%, which he thinks is pretty safe.

property mngmnt/investment

Missed very big last quarter. One problem is that most assets are in Calgary, Edmonton and Saskatchewan, and the rental market there has been incredibly weak. There are signs of stabilization. The trouble is they are competing with condos, and they have large buildings. Last quarter, they came out with a significant amount of capital expenditures they have to put into their buildings. The positive is that they have a balance sheet that allows them to do CapX spending. Fantastic management and they are the biggest shareholder. Getting closer to the bottom and there is some stabilization. If you own, stick with it, but don’t buy it. Distribution yield is 5.7%, which he thinks is pretty safe.

property mngmnt/investment
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$39.030
Owned Owned
No

Must be logged in to use chart
TOP PICK
Baytex Energy Corp(BTE-T) 

September 13, 2017

A 6.625% bond maturing in 2021. Made a big acquisition in the Eagle Ford of Texas. You are getting nothing for the heavy oil business in Canada. If push came to shove, as the debt holder, he will get the Eagle Ford asset if it is ever restructured.

oil/gas

A 6.625% bond maturing in 2021. Made a big acquisition in the Eagle Ford of Texas. You are getting nothing for the heavy oil business in Canada. If push came to shove, as the debt holder, he will get the Eagle Ford asset if it is ever restructured.

oil/gas
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$3.340
Owned Owned
Yes

Must be logged in to use chart
COMMENT

When talking apartments, where are they located? Most of these are located in Ontario. It has done incredibly well because the Ontario economy has done well. They don’t have much exposure in Alberta, but they do have some in the Netherlands. A good company. They are not over distributing their balance sheet, so he does like this. Rent controls are back on which is not a big thing for this company, but also not a great thing. Trading at about 16X Price to AFFO, on the high side historically.

investment companies/funds

When talking apartments, where are they located? Most of these are located in Ontario. It has done incredibly well because the Ontario economy has done well. They don’t have much exposure in Alberta, but they do have some in the Netherlands. A good company. They are not over distributing their balance sheet, so he does like this. Rent controls are back on which is not a big thing for this company, but also not a great thing. Trading at about 16X Price to AFFO, on the high side historically.

investment companies/funds
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$33.490
Owned Owned
No

Must be logged in to use chart
COMMENT
Cineplex Inc(CGX-T) 

September 13, 2017

Something he owned, but got out too early. Management is fantastic. The last quarter, the AMC’s release in the US scared him. They came with guidance and missed their numbers. You could skew this to the box office content. The blockbusters were not in it this year. Has a feeling that the window is smaller for theatrical releases. Also, feels there is less tendency for people to go to the movies. They have some side businesses which are really good. The concession business is decent. Their new Rec Room proposition is fantastic, but that doesn’t move the needle. Thinks there are tremendous headwinds for them.

other services

Something he owned, but got out too early. Management is fantastic. The last quarter, the AMC’s release in the US scared him. They came with guidance and missed their numbers. You could skew this to the box office content. The blockbusters were not in it this year. Has a feeling that the window is smaller for theatrical releases. Also, feels there is less tendency for people to go to the movies. They have some side businesses which are really good. The concession business is decent. Their new Rec Room proposition is fantastic, but that doesn’t move the needle. Thinks there are tremendous headwinds for them.

other services
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$38.440
Owned Owned
No

Must be logged in to use chart
PAST TOP PICK
DH Corporation(DH-T (Dead)) 

September 13, 2017

(A Top Pick Feb 17/16. Down 20%.) This got privatized.

other services

(A Top Pick Feb 17/16. Down 20%.) This got privatized.

other services
Paul Gardner, CFA

Partner and Portfolio Manager, Avenue Investment Ma...

PricePrice
$25.490
Owned Owned
No

Must be logged in to use chart
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