Opinions by Don Lato | StockChase
1175
Don Lato

President

ON STOCKCHASE SINCE Nov 2007

Padlock Investment Management


Opinions by Don Lato



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2017-01-24

N/A
A Comment -- General Comments From an Expert 

Market. This has been a great 5 years. It is not a cheap market anymore. We’ve gone from very cheap to pretty fairly valued right now. PE multiples on the index are pretty much in line with historical averages, but he feels that the next stage in the market comes from earnings growth, which we are starting to see with some of these fourth-quarter reports that have been coming in.

Don Lato

President, Padlock Investment Management

Price: $0.020
Owned: _N/A

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2017-01-24

N/A
A Comment -- General Comments From an Expert 

North American investment strategy? Has not changed his strategy since the election. The concern is that on any given day, the president can do or say something irrational and send markets in a tizzy. There are checks and balances in place that will sort of moderate things, and you can’t start making investment decisions on what might happen. To change your investment strategy over a 3-5 year period, would not be in keeping with your best interests. His portfolios are basically 50-50 between Canada and the US.

Don Lato

President, Padlock Investment Management

Price: $0.020
Owned: _N/A

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2017-01-24

PAST TOP PICK
Apple (AAPL-Q)

(A Top Pick Jan 27/16. Up 31.34%.) When he picked it, it was an opportune time. The company had just sold off following a 1st quarter report. A great company and a great product, but still a silly low valuation.

electrical/electronic
Don Lato

President, Padlock Investment Management

Price: $119.970
Owned: Yes

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2017-01-24

COMMENT
AGT Food & Ingredients (AGT-T)

Got a little undervalued. There were a couple of quarters where results were not as robust as they had been, and there were some concerns they had made too many acquisitions a little too quickly. The market for their product is huge, and they have great opportunities with some of their new processing plants and their new rail lines getting their product to market. Valuation is reasonable. Looking out a year or 2, he expects to see much higher prices. Dividend yield of 1.7%.

agriculture
Don Lato

President, Padlock Investment Management

Price: $36.880
Owned: Yes

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2017-01-24

HOLD
Agrium (AGU-T)

In the midst of finalizing their merger with Potash (POT-T), which is slated to close some time mid-year. There are obvious distractions that come with that, and he doesn’t see a big move in the stock between now and when the merger finally closes. You are able to look forward to some synergies upon the closing of the merger, which is a positive. Also, you will now have a very, very dominant player.

chemicals
Don Lato

President, Padlock Investment Management

Price: $145.240
Owned: Unknown

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2017-01-24

PAST TOP PICK
Aecon Group Inc (ARE-T)

(A Top Pick Jan 27/16. Up 18.6%.) It did well after he bought it, but then struggled in the last couple of months. Had a disappointing 3rd quarter earnings result in November, and took a big hit. That was followed a few days later by the resignation of their CEO. Part of the problem in their earnings was just the slowness in the infrastructure spending following Trudeau’s campaign. This is looking for a great year in 2018, and a big jump in earnings. He would be a buyer at these levels.

contractors
Don Lato

President, Padlock Investment Management

Price: $16.160
Owned: Yes

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2017-01-24

COMMENT
Bank of America (BAC-N)

This has had a big move post the election, and sort of treading water now. If we are in an environment where we are going to see rate hikes, and that appears to be upon us for the balance of this year, that is going to be good for financials, particularly the banks. Also, throw in some deregulation on some of their banking activities, and that is a positive for them as well. These stocks are still trading below their historic price/book value, even though they’ve had big moves up recently.

banks
Don Lato

President, Padlock Investment Management

Price: $22.950
Owned: No

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2017-01-24

TOP PICK
Borg Warner (BWA-N)

Auto parts manufacturer. This has lagged in the last couple of years, but has started to pick up recently. They are in the propulsion end of things. With thoughts of electric and hybrid cars, analysts and investors took a pass on them for the last little while. They are still participating in those areas, and in fact their parts are growing in that market. Trading at about 11.5X this year’s earnings and 10.5X next year’s, still well below its historic multiple up 14.5X. They will participate, whether it be hybrid or electric or regular combustion engines. Dividend yield of 1.4%. (Analysts’ price target is $41.12.)

Automotive
Don Lato

President, Padlock Investment Management

Price: $40.430
Owned: Yes

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2017-01-24

BUY
Facebook (FB-Q)

He is very interested, but hasn’t pulled the trigger yet. It has grown a lot, the price has gone up a lot, but earnings have gone up even faster. Valuation is a lot more reasonable now. It is still a fast grower and still trades at a modestly high multiple in the mid-30s, but it is in line with its growth rate.

Don Lato

President, Padlock Investment Management

Price: $129.370
Owned: No

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2017-01-24

COMMENT
General Electric (GE-N)

A good stock and a great company. Relatively cheap trading at roughly 18X this year’s earnings and 15X next year’s, sort of in line with the market. Not a table-pounding buy, but a good core holding for a portfolio. Also, pays a decent yield while you are waiting.

electrical/electronic
Don Lato

President, Padlock Investment Management

Price: $30.000
Owned: Unknown

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2017-01-24

COMMENT
Gilead Sciences Inc. (GILD-Q)

This has been a big disappointment over the last year. They’ve been hit on a couple of fronts. On their hepatitis C drug package, they have almost run out of the easy patients and the growth rate has slowed tremendously. They still have a very good pipeline in terms of HIV drugs, and also trying to build up an oncology pipeline. Stock trades at very, very low multiples, 7 or 8 times earnings. There is not going to be a lot of growth. Because of some of their high priced drugs, they really are in the target of Trump and drug pricing in the US.

biotechnology/pharmaceutical
Don Lato

President, Padlock Investment Management

Price: $70.250
Owned: Yes

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2017-01-24

COMMENT
Manulife Financial (MFC-T)

He likes the look of this. Insurance companies have all had a big move post election, on the premise that we are going to see increased rates. They’ll be big benefactors of that. A dividend increase is a very likely possibility. It’ll be modest and not likely as large a magnitude as the past 3 years. Valuations are very reasonable. Dividend yield is 3%, which is certainly adequate to hold in this environment. This and Sun Life (SLF-T) have the biggest exposure to international markets, which is going to be a key to them.

insurance
Don Lato

President, Padlock Investment Management

Price: $25.010
Owned: No

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2017-01-24

COMMENT
New Flyer Industries Inc. (NFI-T)

A big performer over the last 18 months or so. Just recently announced they were increasing production starting this quarter at about 4%. Backlog has grown. This has come a long way from $6, but still has huge cash generating potential. Expects more M&A (just bought Motor Coach) or an increase in the dividend.

income trust
Don Lato

President, Padlock Investment Management

Price: $41.320
Owned: Unknown

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2017-01-24

COMMENT
Peyto Exploration & Develop. (PEY-T)

Natural gas. Announced some production results for the 4th quarter. A lot of oil companies tend to announce production results immediately after the end of the quarter, but without the corresponding cash flow and earnings numbers, and the financial report usually comes about a month later. Some of this company’s production numbers were a little below what analysts were looking for. That, combined with a softer natural gas market, took a toll on the stock, and it has been very much an under performer for the last 4-5 weeks. Still one of the few energy companies in Canada with a pretty decent growth profile, and trades at a pretty reasonable multiple in cash flow. Ably managed. He wouldn’t be overly concerned.

oil/gas
Don Lato

President, Padlock Investment Management

Price: $29.230
Owned: Unknown

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2017-01-24

PAST TOP PICK
Parex Resources Inc. (PXT-T)

(A Top Pick Jan 27/16. Up 65%.) This grew tremendously on new fields and new production. In spite of the big move over the last year, it is off about 20% from its high.

oil/gas
Don Lato

President, Padlock Investment Management

Price: $15.560
Owned: Yes

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