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Stock Opinions by Steve DiGregorio

COMMENT

TSX makes an all-time high today: This is the first time he has such a low allocation to American markets. Capital is finding cheap investments, and Canada is the place. He's bullish oil, foreseeing good returns between now and the end of the year. This will bring money into the Canadian market, and passive money will come back. Trump is a classic high-anchor negotiator. He himself would let Trump win a couple of topics, but then demand the others. He owns almost no consumer staples or discretionary. Bond proxies like utilities and telecoms, have seen a bloodbath this year and this won't change, given rising interest rates and inflation. That said, those stocks are looking cheap now. If you're skeptical about a high-dividend stock, then look at its fresh cash flow, like Altagas. Canadian housing won't be the best investment in the coming decade and will go sideways.

Unknown
BUY

He's starting to warm up to retail REITs. It's really out of favour these days. Buy now and it will go sideways for 12 months before it ticks up. Take the dividend now before the stock rises later. He is comparing Riocan to Brookfield who usually buys properties early and are usually right. He wouldn't shy away from Riocan here.

property mngmnt / investment
COMMENT

He sold it recently, based on a sale within Parkland based on leverage, and he's moving away from leveraged companies. The yield is safe and you can hold it for that, but it's a little too levered for his tastes.

merchandising / lodging
BUY

He's be happy to be long this and sees a little bit of upside left here. It split today and expects it to see $70. The next quarter should be good, because the bad weather this quarter will lead to pent-up demand.

Consumer Products
BUY

He likes their relationship with Air Canada--they handle Jazz for them--a risk-free contract. So, the cash flow is stable. Has a healthy, safe yield. Enjoyed an equity investment from Fairfax, recently. You can be long this stock here.

Transportation & Environmental Services
DON'T BUY

He gets asked about this stock the most. Fundamentals are solid, but it's highly levered and suffers from a complicated company structure. It's on a long-term downturn. He's on the sidelines, waiting to see how interest rates effect this.

oil / gas pipelines
DON'T BUY

Many ask him about this stock. He sold his shares recently. Altagas sold its crown jewel asset in BC and replaced it with a lower-case one, which they're now pushing for closure. Their free cash flow isn't impressive. This could grind higher to $28. They will likely sell more assets and borrow more to complete their WGL acquisition.

oil / gas
BUY

Very well managed. You can sleep well at night owning this. He hasn't looked at the deal just announced a few hours ago where they bought some Quebec wind farms. Leveraged levels are fine. You can buy this and do okay. Doesn't see a lot of capital appreciation until there's resolution about interest rates rising. A solid company. Fairly valued compared to peers like Fortis.

electrical utilities
PAST TOP PICK

(Past Top Pick, January 23, 2017, Down 6%) He sold recently his shares, because they took on too much debt. He doesn't like highly levered companies. They've had some good recent quarters though.

computer software / processing
BUY

Airlines are now profitable and generate decent cash flow. He prefers Air Canada, but Westjet's headwinds are behind them and the recovery in western Canada is a tailwind. Fair valuation. A decent time to enter this.

Transportation
STRONG BUY

Good managers, have done an excellent transforming this business, raising the share price and diversifying outside Canada. He sees contonued dividend growth into the future. There's a lot to like here. The shareholder base is loyal. Has owned this for 9 years. Really likes this.

electrical utilities
DON'T BUY

He owns no grocers now. Loblaw faces the Amazon threat, as well as Walmart and Costco competition. He doubts Loblaw can maintain their margins. Shoppers Drug Mart though is rock solid. Look elsewhere.

food stores
BUY

Controlled by a Vancouver family who have done a good job of managing. Safe dividend, and he expects good growth numbers. Slightly levered. You're okay to own it. He needs to study this stock more. They have production in California, so he's not sure how tariffs--a nightmare to figure out in general--will effect them. Pays a 7.7% yield

wholesale distributors
DON'T BUY

Pays a high 17.5% dividend, so there will be a serious cut. He hasn't owned this in a long while. Media is changing a lot. Shaw owns a big chunk of this company and wants to sell it. The share should be lower than the current price.

entertainment services
BUY

He's perplexed that it's trading so cheaply now (same goes with Manulife and Sunlife). He'd buy into this space now. His only worry is that maybe interest rates aren't rising as much as we think. Good value here.

insurance
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