Peter Hodson

i2i Capital Management was set up three years ago to invest in U.S. stocks. It is a hedge fund, non-Canadian and has accredited investor status. He loves the U.S. market which has massively outperformed the Canadian one. The regular 5i Research has been in business for 13 years helping Do-It-Yourself investors. It is a pay for research company which covers Canadian stocks, has model portfolios and a Q&A section. They have answered 180 000 questions over the 13 years. They need the small cap market to kick in because that's their focus. The largest companies are great and have just kept on climbing and could still do so for a while. But this leads to small cap companies falling behind in valuation and it has always been like that. However small caps do better since they grow faster, can have leverage to contracts and do outperform longer term. No one really cares about this most of the time including now because everything else is going so well. However we might see a switch as the value gap has changed and small caps which are still growing fast become cheaper. He would rather find a small or mid cap right now and enjoy it as it grows into a big company. The giant large cap companies can come in and buy out good Canadian companies at good valuations because they're not rewarded by the Canadian market.

They get a royalty on what's delivered so are tied to iron ore prices. Their dividend is tied to earnings and they just cut the dividend from $1.10 to $0.70 for a yield of 10%. It is an interesting stock because of the valuation - 10X Earnings, cash - $40 million, and exposure, but they need iron ore to get back on track and China to grow again.

It is in the metal fabrication business. They just raised their dividend this year and have dramatically changed their balance sheet for the better, so it is in much better shape than in past cycles. They also have a U.S. operation and have done a great job managing their working capital. Tariffs could hurt them a bit.

It has changed a lot and starting to focus more on helping clients develop new projects. It is riding the AI boom and has just passed the old high from23 years ago. Has had a very low multiple for a long time. It has started to execute better, grow faster and meet expectations. It is quite cheap in terms of tech stocks and should do quite well from a momentum standpoint.

It is 2 years old, doing many things right, has grown earnings at 40% and raised its dividend many times. Therefore it is both income and growth. Its valuation is higher now and is near 20X earnings while the sector trades at 11 or 12X. Has business in both the U.S. and Canada. He is a little concerned if Trump sets the maximum interest rate at 10% but does not necessarily think that will happen. It should consolidate so you could buy in the lower 30's.

It has come way down with the money laundering scandal. It decided what it will pay but the stock dropped again so it has been doubly punished. Now trading below 10X - the valuation and dividend are OK. Has a new CEO and will manage the U.S. situation OK so could be fine over time. Any positive news could cause it to head back up so it is buyable.

It is a really interesting mid cap of about $1 billion. It is very well managed  and has made a couple of really strong acquisitions. It has increased its margins and revenue and upped its guidance last week. It is also profitable and the growth rate looks really good but the stock has lagged. Management has never strayed from their strategy and is going to grow this business and shift the Canadian market into the digitalized type of world.

It is an industrial engineering company. The stock ramped way up and fell right back down to an attractive multiple. The stock is not where it should be considering the fundamentals, valuation and growth potential. It is riskier and cyclical.

It is going pretty well and there it is basically a duopoly. Protectionism and domestication is good for transportation including railways and trucking. The multiple is a little high but it is a solid blue chip.

Peter talked more about his reasons for liking small caps. Historically small caps have always been more expensive than large caps because they grow faster. Small caps get more attention as takeover or merger candidates. In the last three years they became cheaper especially in 2022. Small caps have the capacity to meet the market's needs when business is brought back to Canada. M&A will be easier over the next 4 years. Small caps got their house in order during Covid so they are in good financial shape. The stocks are volatile but growing and having no debt and lots of cash.

Both companies have done quite well and both are cheap with secure dividends. It has been a good year for the sector but they may not get the same returns going forward.

Both companies have done quite well and both are cheap with secure dividends. It has been a good year for the sector but they may not get the same returns going forward.

It is natural gas focused and the price of nat gas is in the doldrums. It is the best nat gas company in Canada with very good management. It pays a nice dividend as well as special dividends regularly and has a great balance sheet along with making great acquisitions. However it is hard to predict the sector and hard to make money if the gas price is not going anywhere.

It is an OK company with cash flow but has not received respect. It has tried to improve its operations and cut costs but it is a cyclical business. It is quite leveraged.

It is hard to like a stock that has cut it dividend by 75%. Weather (milder winters) is an issue for companies involved in the heating business. Its revenue base is not growing as fast as before. The stock has done nothing for a long time. It's interesting that15% is owned by Brookfield.  Propane is a very necessary product.