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Stock Opinions by Colin Stewart

COMMENT
Markets in the summer. We'll see if sell in May and go away comes true this year. Optimistic on the economic outlook. Canada has lagged the broader reopening, but now starting to see things open up. Consumers have high savings rates and want to get out and spend money. Equity markets already have the good news built in. More of a stock-pickers market, not everything is going to work. More challenging to make money going forward. Investors will have to be more selective.
Unknown
COMMENT
Gambling mentality. Speculative activity is one of the risks to the outlook. Currently contained to areas such as SPACs, crypto and hot IPOs. Meme stocks such as AMC are concerning. These times of speculative activity usually don't end well and someone is left holding the bag. Investors need to be wary. Ask what's driving a stock, fundamentals or speculation?
Unknown
HOLD
High quality. Focused on defense. Nothing wrong with it. 11x enterprise value to EBITDA. Nice dividend of 2.6% or so. Large company, steady outlook. Not expecting huge growth, pretty modest over next couple of years. You can hold it for the yield.
Transportation
DON'T BUY
He's cautious on airline stocks. Misconception that if the stock is down a lot, it's undervalued, and there's a lot of catch-up. He's positive on the reopening. But the enterprise value of the business is back to pre-pandemic highs. Issued a lot of debt and equity, resulting in an expensive valuation. Look elsewhere, perhaps to aerospace.
Transportation
HOLD
Pretty steady, long-term position. Steady pipeline business, nice dividend. Revenues guaranteed by long-term contracts. Good dividend history. Uncertainty in the near term. Good one to hold long-term in a TFSA.
oil / gas pipelines
BUY
Recent acquisition will help them transform to a faster growth company with more customers, recurring revenue from SaaS, and US exposure. Likes management. Main reason share price has pulled back is the correction in growth stocks. Looks cheap here, and he's been adding at these levels.
Telecommunications
BUY
Likes it. Correction in last 4 months has hit the sector. Robust outlook for the next 5 years. Solid management team. Expects continued growth and perhaps increases in dividend. Adding at these prices makes sense.
electrical utilities
BUY
Higher risk, as it's based in Nicaragua. Outlook is positive. Discounted valuation compared to larger peers. Astute management. Over time, should grow and diversify geographically. Price pullback due to pullback in the renewable sector plus uncertainty in Nicaragua. Cheap, nice yield, could be a takeover candidate.
INDUSTRIAL PRODUCTS
PARTIAL SELL
High likelihood of the deal going through. If the deal doesn't go through, would have fairly significant downside. One strategy might be to sell a partial position, and put in another telco. Canadian telcos are steady businesses, modest growth, nice dividends.
Cable
WATCH
Fantastic service for consumers. Overall outlook is good. A reopening play. Caveat is that it's not making money. He's watching it, and once it's profitable, he'd consider investing.
Technology
PAST TOP PICK
(A Top Pick Mar 17/20, Down 17%) Really well run. Benefited from pandemic trends. Pulled back because of fears it can't replicate those results. Good long-term business, strong balance sheet, good management. Next leg up will probably be making an acquisition. Price is good value here.
investment companies / funds
PAST TOP PICK
(A Top Pick Mar 17/20, Down 6%) Plant-based area has earned a lot of attention. Unfairly penalized for the slower ramp up of meat alternatives. Trades at only 7x EBITDA, without the plant-based component. If the plant-based sector was spun out, share price would easily be over $40. Be patient, a ton of value, core business is strong.
food processing
PAST TOP PICK
(A Top Pick Mar 17/20, Up 0%) New CEO last year who's doing things to accelerate the business, which he sees as positive. SaaS for the education sector. Trying to grow organically and by acquisition. Low valuation. Optimistic over the next few years.
Business Services
WAIT
Well run. Benefited during the pandemic. Stepped up their online game. Online demand will continue. Tough comparisons to last year. May be better to wait and see how investors react over the next few quarters. Not huge downside, but more of a wait and see.
food stores
HOLD
Really likes the business. Land registry technology in Saskatchewan, a monopoly position. Provide services globally. Earnings and EBITDA have grown, so there's been multiple expansion. It's a comparably cheap stock, nice dividend, tons of free cash. Opportunities to make acquisitions. Long-term outlook is very good.
0
HOLD
Massive investment in Asia is one of the positives. Long-term opportunity is good. Interest rate sensitivity of the lifecos can have a magnified effect the stock price. As a long-term investor, don't worry about this.
insurance
COMMENT
US homebuilders. US homebuilders have done very well, with increased demand, housing starts and prices. Not clear how persistent the trend to move out of the cities will be. But overall, the trend to more single family homes will play well for them. If there were a pullback, he'd look at companies like TOL and LEN.
Unknown
DON'T BUY

BMO vs. RY He'd favour RY over BMO. BMO has a large franchise in the US midwest. RY is more active in the east and south. RY is better managed, and that's why it has a higher valuation. Won't go too far wrong owning RY. RY is well positioned with their US footprint, as well as being the largest and most dominant player in Canada.

banks
BUY

RY vs. BMO He'd favour RY over BMO. BMO has a large franchise in the US midwest. RY is more active in the east and south. RY is better managed, and that's why it has a higher valuation. Won't go too far wrong owning it. Well positioned with their US footprint, as well as being the largest and most dominant player in Canada.

banks
TOP PICK
Canadian-based aerospace, in both defence and commercial. Commercial came under pandemic pressure, but defence performed well. Last year, it had close to record profitability and strong free cashflow, using it to reduce debt. Steady and quality business. A reopening play. Discounted valuation. Well managed, strong balance sheet, chance for acquisitions. No dividend. (Analysts’ price target is $21.92)
misc industrial products
TOP PICK
Distributes automotive parts and industrial paint. Suffered during pandemic. Will benefit from increased driving post-pandemic. New CEO is well respected, paid down debt. Cheap valuation. A good turnaround play. No dividend. (Analysts’ price target is $17.80)
wholesale distributors
TOP PICK
Global seller of farm equipment. Well run. Strong crop prices benefit them, as farmers have more money to replace farm equipment. Attractive valuation, positive demand outlook. Yield is 1.60%. (Analysts’ price target is $55.75)
machinery
COMMENT
Is there too much euphoria in the market right now? A mixed bag. Economic outlook very strong with people getting vaccines, economy reopening, pent-up consumer demand. Market's had a good run. Pockets (tech, in particular, and speculative areas) are showing some froth. Up to investors to pick the right securities in the right sectors. Value-based, cyclicals will benefit. Some the of high flyers from last year can take a step back.
Unknown
COMMENT
Which economically sensitive cyclicals look most promising? A wide range. Canadian commodity companies (copper mining, steel, agriculture). What's good for commodities is good for the Canadian equity market.
Unknown
COMMENT
Are rising bond yields spooking you at all? Something to be aware of and a little bit cautious. The most highly valued areas, such as tech, and speculative areas are most susceptible to the rising rates. Bond yields moving up sharply has made some of the high PE stocks quite vulnerable.
Unknown
SELL
Market's pleased with recent results, dividend increase, special dividend, 2021 guidance. Still good value. A valuable asset. Challenge is that coal is viewed negatively from an environmental perspective. So what's the long-term viability? Speculation if coal could be replaced by shipping other commodities. He sold.
INDUSTRIAL PRODUCTS
DON'T BUY
Canadian success story. Health technology play. A popular stock. Be cautious because of the valuation. Debatable if recent acquisition will be accretive. Trades at 35x forward EBITDA, so quite expensive.
Healthcare
HOLD
Very well run. Fundamentals in the P&C insurance industry are very positive. It's a "hard market", so they're enjoying significant price increases and more volume across different lines of business. Currently making a pretty significant acquisition.
insurance
PARTIAL SELL
Very well run. Outlook for renewable power is very strong over the next 5-10 years. NPI has opportunities to grow further. Stock's run up. Bond yields moving up tends to put pressure on utilities that have a strong dividend yield. If you've had a gain, consider taking money off the table and selling 1/3 of your position. It won't get back to last year's lows.
Utilities
COMMENT
CAD vs. USD CAD has strengthened recently. One of the better currencies globally in 2021 against a weaker USD. Could be related to energy prices picking up or that there's a cyclical trade underway, commodity prices improving, more US investors moving assets to the Canadian market. He worries a bit longer term. US is in better shape than Canada in terms of the consumer, economic reopening, GDP outlook, debt-to-GDP levels. Unlikely CAD goes back to par. If CAD goes up to 85-86 cents, he'd consider moving some assets back to USD.
Unknown
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