Stock Opinions by James Hodgins - Stockchase Experts
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James Hodgins @

On Stockchase since : Oct 2010

Chief Investment Officer

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Stock Opinions by James Hodgins - Stockchase Experts


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COMMENT
General Market Comment 

August 28, 2018

What is Market-Neutral Investing? A market-neutral find tries to be effectively short as much as it is long. He has about $400 million assets under administration, with roughly $200 short and $200 long.

What is Market-Neutral Investing? A market-neutral find tries to be effectively short as much as it is long. He has about $400 million assets under administration, with roughly $200 short and $200 long.

Unknown
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$0.020
Owned Owned
_N/A

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COMMENT
General Market Comment 

August 28, 2018

Market. He has no inside insight about the NAFTA negotiations but suspects that they will take a little while (longer than the week currently being talked about). This has been a hot topic since Trump was elected and so, he thinks, investors have already positioned themselves in terms of this risk. Therefore, he is focused on the fundamentals and risks of individual companies rather than on the macro developments. The investment theme that is currently most interesting to him is the interest rate-hiking cycle. Short rates are up, not just in Canada. This usually has a lagging impact. The last rate-hiking cycle was in 2007. Other similarities to 2007 are the yield curve and the level of M&A activity (the market is blowing past the 2007 level of M&A). M&A has involved several trillion dollars this year, which makes shorting individual companies very challenging, but he thinks that shorting is likely to pay off on a go-forward basis. He has been doing well with a merger arbitrage strategy.

Market. He has no inside insight about the NAFTA negotiations but suspects that they will take a little while (longer than the week currently being talked about). This has been a hot topic since Trump was elected and so, he thinks, investors have already positioned themselves in terms of this risk. Therefore, he is focused on the fundamentals and risks of individual companies rather than on the macro developments. The investment theme that is currently most interesting to him is the interest rate-hiking cycle. Short rates are up, not just in Canada. This usually has a lagging impact. The last rate-hiking cycle was in 2007. Other similarities to 2007 are the yield curve and the level of M&A activity (the market is blowing past the 2007 level of M&A). M&A has involved several trillion dollars this year, which makes shorting individual companies very challenging, but he thinks that shorting is likely to pay off on a go-forward basis. He has been doing well with a merger arbitrage strategy.

Unknown
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$0.020
Owned Owned
_N/A

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BUY

He’s bullish on it. It took a big hit on its first quarterly announcement. The second quarter was fine. The problem was the spike in oil prices. They have a problem keeping up with a rapid price rise, but a quarter later they have caught up and the stock has come back. He thinks the electric vehicle infrastructure will take a lot longer than the market anticipates, which gives Couche-Tard a longer time to adapt. He expects them to turn in nice cash flows under their current model for at least a decade. Headwinds? (a) sharply rising energy prices over the short term; (b) reduced driving miles, as a social trend; (c) currency risk, because they are effectively long the US dollar, though this is currently a tailwind for them; and (d) changing habits of their customers such as increased cigarette regulation.

food stores

He’s bullish on it. It took a big hit on its first quarterly announcement. The second quarter was fine. The problem was the spike in oil prices. They have a problem keeping up with a rapid price rise, but a quarter later they have caught up and the stock has come back. He thinks the electric vehicle infrastructure will take a lot longer than the market anticipates, which gives Couche-Tard a longer time to adapt. He expects them to turn in nice cash flows under their current model for at least a decade. Headwinds? (a) sharply rising energy prices over the short term; (b) reduced driving miles, as a social trend; (c) currency risk, because they are effectively long the US dollar, though this is currently a tailwind for them; and (d) changing habits of their customers such as increased cigarette regulation.

food stores
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$62.140
Owned Owned
Yes

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DON'T BUY
Trevali Mining Corp(TV-T) 

August 28, 2018

This is a classic potential value trap. It looks very cheap on a short-term basis but the assets that it has are not low-cost assets. However, of the base metals, he is most bullish on zinc. This is a good way for someone to take a levered position on zinc, but he thinks base metal fundamentals are challenged now. The trend for base metals seems to be downward, and there was a huge stocking up of inventories of base metals back in the spring, especially on the Shanghai exchange, and that still has to be unwound. He was generally short base materials in the Spring but is neutral now. He is still short the renewable energy materials, lithium and graphite, because he thinks the market is expecting the infrastructure that will use these to be built out faster than it will actually be built.

Mining

This is a classic potential value trap. It looks very cheap on a short-term basis but the assets that it has are not low-cost assets. However, of the base metals, he is most bullish on zinc. This is a good way for someone to take a levered position on zinc, but he thinks base metal fundamentals are challenged now. The trend for base metals seems to be downward, and there was a huge stocking up of inventories of base metals back in the spring, especially on the Shanghai exchange, and that still has to be unwound. He was generally short base materials in the Spring but is neutral now. He is still short the renewable energy materials, lithium and graphite, because he thinks the market is expecting the infrastructure that will use these to be built out faster than it will actually be built.

Mining
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$0.800
Owned Owned
No

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BUY
George Weston Ltd.(WN-T) 

August 28, 2018

He usually invests in small-to-midcap companies, but he likes this one and owns a small position. The price has been dropping and he sees this as a good entry point. They have a lot of excess capital, which he expects them to deploy in the back half of the year. His guess is they will expand financial services -- PC Financial -- rather than retail. They have been growing PC Financial and he expects an acquisition in that space.

food processing

He usually invests in small-to-midcap companies, but he likes this one and owns a small position. The price has been dropping and he sees this as a good entry point. They have a lot of excess capital, which he expects them to deploy in the back half of the year. His guess is they will expand financial services -- PC Financial -- rather than retail. They have been growing PC Financial and he expects an acquisition in that space.

food processing
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$101.560
Owned Owned
Yes

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BUY
TheScore Inc.(SCR-X) 

August 28, 2018

He would not short this because there is an ongoing big run up in anything associated with sports gambling and it looks as though the US will legalize that. Market cap is $100 million which would be easy to buy. He expects this to be acquired--no longer publicly traded--within a year, probably at a higher price.

He would not short this because there is an ongoing big run up in anything associated with sports gambling and it looks as though the US will legalize that. Market cap is $100 million which would be easy to buy. He expects this to be acquired--no longer publicly traded--within a year, probably at a higher price.

Unknown
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$0.390
Owned Owned
Yes

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DON'T BUY
Westjet Airlines(WJA-T) 

August 28, 2018

He is short WestJet and has been long Air Canada against it. That is still the trade he would favour. WestJet built out too much capacity. There is no compelling reason to own it. Tax loss season is coming and companies that have underperformed, like WestJet, will stay under pressure.

Transportation

He is short WestJet and has been long Air Canada against it. That is still the trade he would favour. WestJet built out too much capacity. There is no compelling reason to own it. Tax loss season is coming and companies that have underperformed, like WestJet, will stay under pressure.

Transportation
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$18.790
Owned Owned
No

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DON'T BUY
AutoCanada Inc.(ACQ-T) 

August 28, 2018

He tends to short companies that show negative trends and he plans to stay short on this even though it has already dropped so much. It has had a few disastrous quarters in a row. There was chatter a year ago about them spinning out some real estate assets but apparently that failed. The balance sheet is now getting tight, with covenants that limit them to 4x debt to EBITDA. He thinks they’ll push up against that this quarter. He’ll stay short until they start improving their margins.

specialty stores

He tends to short companies that show negative trends and he plans to stay short on this even though it has already dropped so much. It has had a few disastrous quarters in a row. There was chatter a year ago about them spinning out some real estate assets but apparently that failed. The balance sheet is now getting tight, with covenants that limit them to 4x debt to EBITDA. He thinks they’ll push up against that this quarter. He’ll stay short until they start improving their margins.

specialty stores
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$12.560
Owned Owned
No

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HOLD
Knight Therapeutics(GUD-T) 

August 28, 2018

He likes this. It has $5 a share in cash and he likes that they have had the discipline to keep waiting for acquisitions that appear cheap enough to take over.

He likes this. It has $5 a share in cash and he likes that they have had the discipline to keep waiting for acquisitions that appear cheap enough to take over.

0
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$8.560
Owned Owned
Yes

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BUY

 It screens well in his quantitative strategies. They had a big hiccup a year and a half ago with one of their restaurant royalties. Since then, they added an auto muffler and oil change service. It has grown quickly. The stock hasn’t done much but has built a big base at this level. He’s looking to buy more. He likes the interest-sensitive stocks now because he thinks the rate-hike cycle is almost done, especially in Canada. He thinks that a significant consumer slowdown has started, which will put a brake on rates. In the US, the Fed has been indicating too that it is slowing rate hikes. (Analysts’ price target is $4.13) 

other services

 It screens well in his quantitative strategies. They had a big hiccup a year and a half ago with one of their restaurant royalties. Since then, they added an auto muffler and oil change service. It has grown quickly. The stock hasn’t done much but has built a big base at this level. He’s looking to buy more. He likes the interest-sensitive stocks now because he thinks the rate-hike cycle is almost done, especially in Canada. He thinks that a significant consumer slowdown has started, which will put a brake on rates. In the US, the Fed has been indicating too that it is slowing rate hikes. (Analysts’ price target is $4.13) 

other services
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$3.240
Owned Owned
Yes

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PAST TOP PICK

(A Top Pick June 23, 2017. Up 3%). This is the biggest position in his small-cap fund. He likes it from the fundamental change perspective and as a possible takeover..

oil/gas

(A Top Pick June 23, 2017. Up 3%). This is the biggest position in his small-cap fund. He likes it from the fundamental change perspective and as a possible takeover..

oil/gas
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$1.950
Owned Owned
Yes

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PAST TOP PICK
Klondex Mines Ltd(KDX-T) 

August 28, 2018

(A Top Pick June 23, 2017. Down 35%). All the junior golds were a disaster. It got a takeover bid and he is glad to be out of it.

precious metals

(A Top Pick June 23, 2017. Down 35%). All the junior golds were a disaster. It got a takeover bid and he is glad to be out of it.

precious metals
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$3.070
Owned Owned
No

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PAST TOP PICK
CASH(CASH) 

August 28, 2018

(A Top Pick June 23, 2017). The central bank cycle was turning against liquidity. He also thought the market was significantly overvalued and thinks the US market (but not the Canadian one) has gotten more overvalued. He thinks the interest-rate increases have done damage and that business will slow down. He doesn’t know how far the market will go down, but looking at Shiller PE ratio, the market looks 40% to 50% overvalued. In addition, in every 10 year period, there has been at least one 30% correction. He sees a potential for that type of correction now, but can’t predict when it will happen. A different bubble triggers the correction each time. This time, he is watching emerging markets. The US market might continue to do well even if there is a big correction in emerging markets, partially because of the tax cut, but at some point that sugar high will wear off.

N/A

(A Top Pick June 23, 2017). The central bank cycle was turning against liquidity. He also thought the market was significantly overvalued and thinks the US market (but not the Canadian one) has gotten more overvalued. He thinks the interest-rate increases have done damage and that business will slow down. He doesn’t know how far the market will go down, but looking at Shiller PE ratio, the market looks 40% to 50% overvalued. In addition, in every 10 year period, there has been at least one 30% correction. He sees a potential for that type of correction now, but can’t predict when it will happen. A different bubble triggers the correction each time. This time, he is watching emerging markets. The US market might continue to do well even if there is a big correction in emerging markets, partially because of the tax cut, but at some point that sugar high will wear off.

N/A
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$0.010
Owned Owned
_N/A

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DON'T BUY

Everything moved up on Monday, it felt like a compulsory buy. He used to own it but owns only debentures and warrants now. It’s a plain vanilla cannabis company--growers. They don’t plan to retail, they plan to sell to retailers. They seem to know what they’re doing, but in terms of new investments, there are others that he likes better.

Everything moved up on Monday, it felt like a compulsory buy. He used to own it but owns only debentures and warrants now. It’s a plain vanilla cannabis company--growers. They don’t plan to retail, they plan to sell to retailers. They seem to know what they’re doing, but in terms of new investments, there are others that he likes better.

0
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$1.840
Owned Owned
No

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DON'T BUY

The first few quarters since the GTA bundle blew the doors off, but there isn’t much transparency to that agreement. Some analysts have a sell on it because they believe that there is a tipping point in the agreement, so that if revenue goes down a little bit, cash flow drops near zero. He believes that he has a small short position in the company, mainly from a valuation perspective. There is also ongoing risk from an ongoing investigation into money laundering in BC. Nothing incriminating of Great Canadian has come from this so far, but it is a risk that is not publicized enough, creating a basis for a short.

entertainment services

The first few quarters since the GTA bundle blew the doors off, but there isn’t much transparency to that agreement. Some analysts have a sell on it because they believe that there is a tipping point in the agreement, so that if revenue goes down a little bit, cash flow drops near zero. He believes that he has a small short position in the company, mainly from a valuation perspective. There is also ongoing risk from an ongoing investigation into money laundering in BC. Nothing incriminating of Great Canadian has come from this so far, but it is a risk that is not publicized enough, creating a basis for a short.

entertainment services
James Hodgins

Chief Inve, Curvature Hedge Stra...

Price Price
$46.850
Owned Owned
No

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