Barry Schwartz

ZZZ, CWB, STLC, IDG, NVEI, and NBLY all this year. On Sleep Country, Prem Watsa seems to buy these mediocre retail companies, and clearly he sees value long term. 

What's going on is there's no interest, lackluster support in Canada. Everybody's putting money into either GICs or the big techs. And that's what's really going on across the globe. Small caps in the US have underperformed for a very long time. As a result, you're seeing undervaluation, no support, a very illiquid market in Canada making it difficult for managers like himself to take stakes in these companies.

Lots of money in private equity is just chomping at the bit to put money to work, with billions and billions of cash on the sidelines. You're going to see a lot more of these small-cap deals in Canada in so many sectors.

He manages about $2.4B for his clients. So he likes to buy healthy stakes in companies, somewhere between $75-100M of a stock. If he's looking at a small-cap company with a $1B market cap, he doesn't want to take a 10% stake in a company and be stuck in it forever. Look at the performance of ZZZ and CWB for many, many years -- they did nothing, you just got the dividend. That's terrible. 

There aren't too many great small caps in Canada that he wants to own and be stuck. But for a retail investor, if you're patient, and you see the undervaluation, you have the opportunity to acquire a nice stake and make a lot of money.

A done deal, for sure. There's just so much money in private equity. FFH and BRK are both swimming with cash. There are great opportunities and great undervaluation out there. 

He doesn't have a list of names, but you can investigate yourself. Any Canadian tech company that isn't CSU, GIB.A, or SHOP is going to get taken over at some point in time.

His clients looking for income own shares in PPL and KEY. Doesn't love buying a company just for the yield. He wants to dig deep and figure out the fundamentals, growth prospects, balance sheet status, and payout ratio. Those are things you need to be very careful of when you're buying companies just for income.

If rates continue to fall, ENB is undervalued. And, yes, it could go up to $60-70. But he wants to own companies where he can get double-digit earnings growth over a 5-year period, and a chance to doube his money. He doesn't see that with ENB.

But if you're OK getting a nice yield without the volatility of a growth name, then this is a perfect fit for your portfolio.

The best is behind it, now fairly valued and potentially overvalued. You can't argue with the chart. Still lots of risk in this business. You never know if there are 2 guys in a garage who can come up with better software. So many companies like AMD and INTC are working to try to compete. At the same time, big techs are trying to reduce their reliance on it.

Better ideas in software or big tech.

Absolutely buy at current levels. Stock fell on Friday after reporting very strong earnings on Thursday. Goes to show that predicting what a stock will do after earnings is a waste of time. The streaming wars are completely over; all across the globe, streamers are reducing their spend and starting to sell their stuff to NFLX.

Still very reasonable value, compared to taking your family out to a movie which costs a fortune. Will continue to add amazing programming. Thinks stock will earn ~$20 a share this year. Believes it can continue to grow at double-digit rates for a long time. New subscribers, raising prices, adding new service lines. For him, a stalwart.

The type of company he doesn't like to invest in. Swimming in debt, earnings not growing. What's the catalyst to take it higher? A complete mess. Huge competition. Healthcare space is so tough. There could be value here, but he wouldn't recommend it to anyone.

Bit of a pullback last couple of days in the NASDAQ, but no one can really complain, as it's gone parabolic the last 19 months. Market now is just reacting to the fact that the NASDAQ went straight up, plus rumours and news coming out every day about the US election.

The bottom line for him is strong earnings, interest rates probably coming down, and inflation looking like it's been tamed. All good ingredients for a strong market for the rest of the year.

He's thinking that it's clear that interest rates are going to be cut across the globe. US has not started to cut yet. No one expects the Fed to cut in July, though that could happen. Expects interest rates to be cut in Canada, and for many months to come. 

Canada's rate could come down by 1.5% over the next 12-18 months. So when your GIC at 5% comes due, you're not going to get 5% anymore. So he expects that money to flow to markets and other risk assets. If you're only getting 3.5-3.75% on your bond or GIC, that's not so attractive after fees, taxes and inflation.

Expects good earnings. We just started Q2 earnings, and some companies have reported, especially the big banks. All looked pretty good.

Finally showing some life. Yesterday, it might have been up double digits for the year, seeing a bit of pullback today. Oil prices have remained strong, gold has ticked up with uncertainties. RY is at an all-time high. NA has recovered from worries about the CWB acquisition. Not too much to worry about in Canada.

Everyone's hoping that, as interest rates get cut, some of the dividend stalwarts will be back in favour. Of course, the Canadian market is filled with a lot of Canadian dividend stocks.

Is it playing catchup? He doesn't know. It's not as good an index as the S&P 500, because companies in the TSX are not as good businesses. But there are always going to be sectors and factors that can push the TSX index up. It's underperformed for many years, so maybe it'll have its day.

In his opinion, financials are rallying because inflation has come down, interest rates will be cut, and that's going to be a big relief for the Canadian economy. There will be fewer worries about bankruptcies, or mortgages coming due that have to be renewed at higher interest rates. Optically, that's bad for some of the banks' net income, but it's terrific for confidence, more lending, and business activity in Canada.

People were pricing in a pretty nasty recession, and that's reversing, so the banks are recovering.

An amazing powerhouse. Doesn't think it will ever give up its #1 spot. Many have tried, all have failed.

Have seen a recovery in shares in last few weeks, as bond proxies usually go up when interest rates go down. Expectation is for multiple rate cuts in Canada. That will improve balance sheet, but doesn't improve the business on a dime. Still getting good uplifts on new rental agreements signed at higher prices.

In NA, we're struggling with an over-supply of industrial real estate. Have to work through it. One of the best-managed REITs in Canada. Likes the industrial sector, not going anywhere anytime soon. But you have to have confidence that interest rates are going to come down materially from here.

Up 17% YTD, so not much of a pullback. On a YTD basis, outperforming the railroads. He likes both those businesses. Canada has good geography for trucking and infrastructure. TFII is a great acquirer and integrator of other companies. Rumours that UPS wants to unload less-than-truckload; perhaps TFII could bid for it. Balance sheet in great shape, more acquisitions to come.

CNR is the laggard. CP is doing nicely. He still regrets not switching from CNR to CP.