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Stock Opinions by Steve Belisle

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Markets. It is concerning that Trump may not be able to do what he has promised and yet markets have rallied. Tax cuts could be positive on the earnings side, but he is worried about how they would be funded. Are there enough shovel ready projects out there? Reforms around health care are causing a lot of concern. A clear positive is the financials. They are already benefiting from higher interest rates and will benefit from lower corporate tax rates and higher interest rates. This is the sector for 2017. It gets complicated as to whether you prefer US companies who do business around the world because of currency hits.

Unknown
BUY

He believes the uptick will hold because the acquisition will be accretive. In this case their acquisition is about a new way to grow rather than about new cost cutting. This is a decent stock to own. He thinks they will gradually pay down their new debt.

packaging / containers
BUY

He likes it. They inject capital into companies via preferred shares. This year was tough because some of their partners ran into difficulties. The cash flow is sustainable. You get a 7% yield plus some growth.

Financial Services
BUY

The company has been a good real estate investor in the past. High quality office buildings. The drag has been the exposure to the UK. Brexit has impacted only about 10% of the financials so should not derail it. Dividend growth may not be spectacular on a going forward basis.

REAL ESTATE
WATCH

They have a good track record with acquisitions. They just closed an acquisition of a US utility that should give them good growth prospects for the next two years. He is concerned about what happens under Trump with renewable power investments. The other problem is tax reform. He is worried if their tax credits will stay going forward.

electrical utilities
BUY

The dividend is safe. The stock has been under pressure from rising interest rates. He likes the business. The water heater business provides a good base. Their recent acquisition in the US has a challenge to convert sales into rentals to provide a recurring cash flow model. You have a sustainable business and a pretty good business base.

Consumer Products
BUY

It remains interesting even though it has been the best performing. They are trading at a discount multiple to two others in the group. They have an attractive Latin American footprint that is growing faster than business here. He likes it. It is not too expensive.

banks
BUY

The key advantage is its dominance in Quebec. They keep getting market share in Ontario. They have great presence in rural areas in Quebec. They have a strong capital market business that has delivered very stable earnings in the last few years. The market has not paid sufficient multiple for this. They are reluctant to make investment outside of Canada. Hopefully they focus on capital markets this year.

banks
PAST TOP PICK

(Top Pick Sep 8/16, Up 9.07%) There is still upside on their multiple. They are still growing on the fee side of the business – fuel cards and so on. The dividend is sending a signal about the stability of this business. He thinks they will increase the dividend by at least 10% in the first few weeks of 2017.

0
PAST TOP PICK

(Top Pick Sep 8/16, Up 12.33%) It is possible you will get near term down side if there is a correction in the market. From here there is decent upside over the long term. He believes it is a business that will grow over the next couple of years regardless of Trump.

consulting
PAST TOP PICK

(Top Pick Sep 8/16, Down 23.43%) Operationally nothing has gone wrong and they keep executing. There has been general pressure on consumer staples stocks. This is a company with high debt. He thought they would pay down debt over time. They are not financially distressed and nothing has changed operationally.

food processing
BUY

US banks stand to benefit from the political reforms. They have a lot to gain because they are the most harshly regulated. Lower corporate tax rates will help them. He would expect faster dividend growth that you have normally seen as well as share buy backs. A lot of good things are already price in, however. Weak economic data is their biggest risk.

banks
DON'T BUY

It needs a lot of capital to maintain its production. They have to spend a lot of money to stand still and the dividend takes a lot to sustain. They have built a pretty good foot print and he has to give them credit for that.

oil / gas
BUY

A company he really likes. The growth is driven mostly by acquisitions. There is lots of room in the industry. They still have room to grow.

food processing
DON'T BUY

They have re-executed the company and done well at it. They have a safe yield that grows and should continue to do so. It is a low risk investment. He prefers RCI.B-T and T-T given the valuation and growth prospects. The sector is vulnerable to rising interest rates and so is not a preferred sector.

telephone utilities
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