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Stock Opinions by James Dutkiewicz

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Markets. Thinks we get a rate hike in June. The Fed minutes are overanalyzed. It doesn’t matter what everyone in the Fed thinks, it is a matter of when rates need to go up. Lots of professionals in the business have never seen the Fed raise rates (9 years ago last) and may overreact. He thinks the economic impact of a rate rise won’t be felt for 2 years. The odds are that Canada will lower rates. Thinks Canadian rates go up mid -2016 again.

Unknown
DON'T BUY

Preferred shares can be floating (cash flows are tied to rate), rate resets (every 5 years they re-issue with new rate) and straight perpetual (can be called any time). In this environment it is tricky. Markets were hit hard especially in the last few weeks and the rate resets were hit the hardest. It’s all in the hands of the issuer, so he has little exposure to preferreds.

Unknown
COMMENT

Prefers an actively managed pool of corporate credits. You can’t get enough diversification in corporate bonds. If you want to move some of your corporate bonds into stocks, how do you trim your holdings – a bit of each? An actively managed corporate bond fund is more appropriate. 85% of his are in high yield corporate bonds.

Unknown
DON'T BUY

Not a badly run REIT, but an unduly amount of exposure in Quebec with creeping debt. There are better REITs in Canada to own.

investment companies / funds
COMMENT

Canada US exchange rate in the next 6 months. He sees 3 or 4 more cents of potential decline in the Canadian dollar.

Unknown
COMMENT

GICs for 1 or 2 years? Not the worse investment. You are sometimes handcuffed for two years – you are locked in sometimes. You could probably do better in a short duration bond fund.

Unknown
COMMENT

Rate adjustments in quarters – Why? Greater than 25 basis points has a shock value. In developed market countries smaller than 25 basis points is just silly and you aren’t impacting anything. You can’t fine tune the economy that much by 5 and 10 point changes.

Unknown
COMMENT

Rising rates in the utility sector. There is a higher degree of certainty of the cash flows in the future so there is a lower discount needed to be applied when comparing to government bonds. Higher quality cash flows like these get hit harder when government rates go up. You are only positively affected when rates go down.

Unknown
COMMENT

Preferred Shares with nice yield that have gone up – continue to hold? They would have to be perpetuals. Rate resets have inherent volatility. He thinks the perpetual preferreds are okay as long as they are not called away from you.

Unknown
PAST TOP PICK

River Cree Entertainment bond, 11%, due 1/20/2021. (Top Pick Jan 6/14, Up 12%) Smoking rooms in a casino. Edmonton. The bonds fell and he bought more. 11% coupon.

Unknown
PAST TOP PICK

Mattamy Group 6.875% 11/15/2020 Bond. (Top Pick Jan 6/14, Up 6%) Modest coupon. Bond was trading lower because of lower outlook in Ontario real estate. Financials are rock solid and he was looking to buy more.

Unknown
PAST TOP PICK

Commerzbank AG 8.125% 9/19/2023 Bond. (Top Pick Jan 6/14, Up 15%) Lower in the capital structure -- in the middle. It is a decent bank and he is high enough in the capital structure that he is not worried.

Unknown
TOP PICK

Cinemark USA Inc. 4.875%, June 1st, 2023 Bond. Second largest globally, third largest in the US in its space. There is expansion into Latin America. A block buster slate of movies in 2015/16 and they have confectionaries. They obviously only go into countries when they can be the 2nd or 3rd biggest.

Consumer Products
TOP PICK

Restaurant Brands 6%, April 1, 2022. Tim Horton’s and Burger King. A lot of debt. Management did a great job of taking out costs in previous companies so thinks they will do it again. Berkshire put capital into the preferreds at 9%, but he is lower in the capital structure.

food services
TOP PICK

Sinclair Broadcast (Television) Group Inc (SBGI.O) Bond, 5.625%, August 1, 2024 A local broadcaster in the US. They reach 38% of the population. They are almost like a toll road for the national broadcasters instead of relying on local advertisers. [They charge the national broadcasters instead of local advertisers]

Unknown
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