Opinions by Greg Newman | StockChase
1056
Greg Newman

Director & Portfolio Manager

ON STOCKCHASE SINCE Sep 2011

Scotia Wealth Management

1056
Greg Newman

Director & Portfolio Manager

ON STOCKCHASE SINCE Sep 2011

Scotia Wealth Management


Opinions by Greg Newman


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General Market Comment 

November 3, 2017

Market. There are 2 real reasons why markets go higher here. One is fundamental and one is technical. Fundamentally, S&P earnings are calling for an estimated 10% earnings growth for 2017 and 11% earnings growth for 2018, and that is without tax cuts. We are not at peak earnings yet. Technically, in the past we have had 12 such times since the S&P data was formulated, where the S&P was up in the months of August, September and October consecutively. Each of those times except for one, the market went higher for the rest of the year.

Market. There are 2 real reasons why markets go higher here. One is fundamental and one is technical. Fundamentally, S&P earnings are calling for an estimated 10% earnings growth for 2017 and 11% earnings growth for 2018, and that is without tax cuts. We are not at peak earnings yet. Technically, in the past we have had 12 such times since the S&P data was formulated, where the S&P was up in the months of August, September and October consecutively. Each of those times except for one, the market went higher for the rest of the year.

Unknown
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$0.020
Owned Owned
_N/A

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PAST TOP PICK

(A Top Pick Oct 21/16. Up 20%.) This has been a Top Pick for several years.

electrical utilities

(A Top Pick Oct 21/16. Up 20%.) This has been a Top Pick for several years.

electrical utilities
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$13.470
Owned Owned
Yes

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COMMENT
Arc Resources Ltd(ARX-T) 

November 3, 2017

Thinks LNG terminals ultimately get built in Western Canada, but not very excited about natural gas prices in the near term. This company is good and its balance sheet is good for 2018. Further into 2019, the balance sheet deteriorates with natural gas prices being where they are. Not cheap relative to its peers, trading at around 9X, whereas its peers are trading at around 7X. Doesn't see a whole lot of growth. Nice dividend, but is at a 165% payout ratio.

oil/gas

Thinks LNG terminals ultimately get built in Western Canada, but not very excited about natural gas prices in the near term. This company is good and its balance sheet is good for 2018. Further into 2019, the balance sheet deteriorates with natural gas prices being where they are. Not cheap relative to its peers, trading at around 9X, whereas its peers are trading at around 7X. Doesn't see a whole lot of growth. Nice dividend, but is at a 165% payout ratio.

oil/gas
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$16.610
Owned Owned
Yes

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BUY on WEAKNESS
BCE Inc.(BCE-T) 

November 3, 2017

Just reported yesterday, and beat on subscriber additions, on both wireless and wireline. This is a wireline company and they beat on that, partly due to Manitoba Telecom synergies. Thinks that is something that can continue, and is just in the early innings. He is only modelling a 2.5% EPS growth over the next couple of years, but not a bad valuation compared to its peers. Strong dividend and good dividend growth. You can buy more of this on a little bit of a pullback.

telephone utilities

Just reported yesterday, and beat on subscriber additions, on both wireless and wireline. This is a wireline company and they beat on that, partly due to Manitoba Telecom synergies. Thinks that is something that can continue, and is just in the early innings. He is only modelling a 2.5% EPS growth over the next couple of years, but not a bad valuation compared to its peers. Strong dividend and good dividend growth. You can buy more of this on a little bit of a pullback.

telephone utilities
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$60.580
Owned Owned
Unknown

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BUY on WEAKNESS

Just had a tougher quarter last quarter with Private Bank Corp results coming in a little bit messy. Their balance sheet isn't as good as the other banks right now. For a 3-5 year hold, he is seeing 4% EPS growth. Trades at a 15% discount to the rest of the banks. Banks are at overbought levels, but are still relatively cheap. On a little bit of a pullback, you could buy this.

banks

Just had a tougher quarter last quarter with Private Bank Corp results coming in a little bit messy. Their balance sheet isn't as good as the other banks right now. For a 3-5 year hold, he is seeing 4% EPS growth. Trades at a 15% discount to the rest of the banks. Banks are at overbought levels, but are still relatively cheap. On a little bit of a pullback, you could buy this.

banks
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$114.110
Owned Owned
Unknown

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COMMENT

This is probably way too cheap. Trading at around 5.8X. Doing a good job of selling their non-core assets. One of the prominent light oil producers in Canada. They've had really strong production growth over the years. However, he models very low growth over the next couple of years. Has 126% payout ratio, so the dividend is not safe. Trading at 3X 2018 and 2019, which has him not being a buyer.

oil/gas

This is probably way too cheap. Trading at around 5.8X. Doing a good job of selling their non-core assets. One of the prominent light oil producers in Canada. They've had really strong production growth over the years. However, he models very low growth over the next couple of years. Has 126% payout ratio, so the dividend is not safe. Trading at 3X 2018 and 2019, which has him not being a buyer.

oil/gas
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$10.480
Owned Owned
No

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PARTIAL BUY
Enbridge(ENB-T) 

November 3, 2017

Thinks a lot of people were buying this at around $49, its 52-week lows, which is usually a bad sign when too many people are too complacent. People are concerned about its debt level. They have normally been telegraphing 10%-12% growth, and have backed away from that and are waiting until Dec 12. This is cheap at 17X. Still has very brisk growth, however, they’ve maintained their guidance. Thinks they have lots of funding abilities through drop downs, asset sales, etc. He would be picking away at this right now.

oil/gas pipelines

Thinks a lot of people were buying this at around $49, its 52-week lows, which is usually a bad sign when too many people are too complacent. People are concerned about its debt level. They have normally been telegraphing 10%-12% growth, and have backed away from that and are waiting until Dec 12. This is cheap at 17X. Still has very brisk growth, however, they’ve maintained their guidance. Thinks they have lots of funding abilities through drop downs, asset sales, etc. He would be picking away at this right now.

oil/gas pipelines
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$46.850
Owned Owned
Unknown

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BUY

This got pounded in the last few days. Moody's downgraded them a couple of weeks ago on line 3 execution risks. Very cheap. Trading at 11X. The dividend is safe-ish. He is modelling a 6% compounded growth rate on EPS over the next couple of years. One of the risks is what happens in Minnesota with the Minnesota regulator, but construction has already begun in Canada and Wisconsin. These pipelines are necessary. Probably a buying opportunity at these levels.

oil/gas

This got pounded in the last few days. Moody's downgraded them a couple of weeks ago on line 3 execution risks. Very cheap. Trading at 11X. The dividend is safe-ish. He is modelling a 6% compounded growth rate on EPS over the next couple of years. One of the risks is what happens in Minnesota with the Minnesota regulator, but construction has already begun in Canada and Wisconsin. These pipelines are necessary. Probably a buying opportunity at these levels.

oil/gas
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$29.050
Owned Owned
Unknown

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COMMENT

Is the high-yield sustainable?As he understands it, this is a corporate finance, where they will take the common and preferred shares, and lever up the common 2 for 1 in terms of growth, and the preferred shares just get the yield. A very concentrated play on the direction of the underlying basket of common. If you believe those 15 stocks are something to be owning right now, you are going to get some good capital appreciation and the yield is safe. If you go into a bear market with the 15 stocks, your yield is not at all safe. This is not without risk.

Financial Services

Is the high-yield sustainable?As he understands it, this is a corporate finance, where they will take the common and preferred shares, and lever up the common 2 for 1 in terms of growth, and the preferred shares just get the yield. A very concentrated play on the direction of the underlying basket of common. If you believe those 15 stocks are something to be owning right now, you are going to get some good capital appreciation and the yield is safe. If you go into a bear market with the 15 stocks, your yield is not at all safe. This is not without risk.

Financial Services
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$10.670
Owned Owned
Unknown

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PAST TOP PICK

(A Top Pick Oct 21/16. Up 1%.) He chose this because of its cheap valuation and its long-term Alberta leases. The balance sheet has gotten slightly worse, but is still pretty good. Payout ratio is still pretty good at 81%. Trading at 12.7X 2017 versus its five-year average of 13.5X and its peers at around 13X.

property mngmnt/investment

(A Top Pick Oct 21/16. Up 1%.) He chose this because of its cheap valuation and its long-term Alberta leases. The balance sheet has gotten slightly worse, but is still pretty good. Payout ratio is still pretty good at 81%. Trading at 12.7X 2017 versus its five-year average of 13.5X and its peers at around 13X.

property mngmnt/investment
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$21.620
Owned Owned
Yes

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DON'T BUY
Loblaw Companies Ltd(L-T) 

November 3, 2017

Q2 earnings were up 10%. Trading below its five-year average by about 2 multiple points. Food inflation is up for the 2nd month in a row after a year of deflation. Minimum wage escalation is bad for them. Have to do a lot of heavy lifting here for their EPS to grow at 7%, and to keep their margins up at around 8.5%. He would not be a buyer.

food stores

Q2 earnings were up 10%. Trading below its five-year average by about 2 multiple points. Food inflation is up for the 2nd month in a row after a year of deflation. Minimum wage escalation is bad for them. Have to do a lot of heavy lifting here for their EPS to grow at 7%, and to keep their margins up at around 8.5%. He would not be a buyer.

food stores
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$67.040
Owned Owned
No

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BUY
Magna Int'l. (A)(MG-T) 

November 3, 2017

He is still modelling growth at 12% compounded annually over the next couple of years. A solid balance sheet, so there is still some M&A potential. In Q2, they upped their sales and the free cash flow forecast. Q3 is going to be strong again. The Canadian manufacturers are still a lot cheaper than the US. Trading at around 8X versus its peers at around 8.3X. There is some uncertainty with NAFTA.

Automotive

He is still modelling growth at 12% compounded annually over the next couple of years. A solid balance sheet, so there is still some M&A potential. In Q2, they upped their sales and the free cash flow forecast. Q3 is going to be strong again. The Canadian manufacturers are still a lot cheaper than the US. Trading at around 8X versus its peers at around 8.3X. There is some uncertainty with NAFTA.

Automotive
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$70.330
Owned Owned
Unknown

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BUY

If you want to buy this, you first want to decide if you want to buy Canadian banks at these levels. If so, which one is the best one to buy? This one is running at a pretty good discount to the rest of the banks, at a time when its capital ratios have been coming up and its growth rate looks pretty good compared to its peers. The energy story is going from really bad to okay. A fairly good story at these levels.

banks

If you want to buy this, you first want to decide if you want to buy Canadian banks at these levels. If so, which one is the best one to buy? This one is running at a pretty good discount to the rest of the banks, at a time when its capital ratios have been coming up and its growth rate looks pretty good compared to its peers. The energy story is going from really bad to okay. A fairly good story at these levels.

banks
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$63.150
Owned Owned
Unknown

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COMMENT

You should be scared of the 8% dividend. 145% payout ratio in 2018. It is very tempting. This is a company that has not shut down production because of ECO prices being so poor. The bad quarters that they have had should reverse itself through the rest of this year. All things being equal, it is probably a buying opportunity, at least for a pop.

oil/gas

You should be scared of the 8% dividend. 145% payout ratio in 2018. It is very tempting. This is a company that has not shut down production because of ECO prices being so poor. The bad quarters that they have had should reverse itself through the rest of this year. All things being equal, it is probably a buying opportunity, at least for a pop.

oil/gas
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$18.350
Owned Owned
Unknown

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COMMENT

He doesn't cover this, but does cover Agrium (AGU-T). Thinks the combined entity will bear fruit for shareholders. This is a market that is fairly depressed and will probably turn up over the next several years. It gives you the cost cutting that will create some shareholder value.

integrated mines

He doesn't cover this, but does cover Agrium (AGU-T). Thinks the combined entity will bear fruit for shareholders. This is a market that is fairly depressed and will probably turn up over the next several years. It gives you the cost cutting that will create some shareholder value.

integrated mines
Greg Newman

Director & Portfolio Manager, Scotia Wealth Manage...

PricePrice
$24.640
Owned Owned
Unknown

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