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Stock Opinions by Jason Del Vicario

COMMENT
He's seeing a lot more value in the markets after this strong sell-off. He's chipping away at these companies at or below his fair-market-value estimates. He is sector and geography agnostic. He looks for strong and predictable returns on capital, and the founder is still involved (i.e. managing it). He's not looking at sectors per se. We're already in a recession, probably since the middle of Q1 earlier this year. A market downturn can be your best friend, which sounds off-putting. Investors should focus beyond the next 6-12 months, which he realizes is tough to do. But investors can look forward to better returns in the future. No idea if there's another leg down in the market though.
Unknown
DON'T BUY
He doesn't follow this, because it's cyclical. LNR's fortunes are tied to car sales. If there's an economic slowdown, car sales will also decline, which is true for LNR historically. Look elsewhere, beyond cars, for predictable cash flows.
transportation equip & components
DON'T BUY
He bought around $30, sold at $90, watched it shoot to $160, and now has fallen. LSPD overpaid for acquisitions. LSPD doesn't fit his criteria, lacking cash flow and positive returns on capital while the founder has stepped back. Not a profitable nor predictable business.
0
WATCH
A predictable, quality company though the PE is too high (though not bad); he prefers 20x PE. Is watching it. There is 80% insider ownership, which can be positive, though not always. In other words, he's neutral about this issue of ownership. Can they compete in China? It's a massive market, but very difficult to survive here. Too risky for him. EL has tremendous brands and nicely grow, overall, though.
Consumer Products
DON'T BUY
He owned it 5 years ago, but return on invested capital over 10 years was above 20%, but has more recently fallen to 5-6%. SAP relies on production and the supply of milk, which they don't control the price of (makes him nervous). So, it's like a commodity play. The returns on capital are too low for him and have been declining.
food processing
DON'T BUY
Doesn't own any of the Canadian banking cartel. This industry needs disruption and more competition. Banks have enjoyed excess profits because they are a cartel. TD and Royal were the leaders here, but return in invested capital are in the mid-10s. Sure, reliable returns, but that is due to an oligopoly. More banks would benefit the Canadian consumer, certainly.
banks
DON'T BUY
They carrry little debt and are still run by the founder which is good. It trades around 14x earnings while returns remain above 20%. Well-run. Has relied a lot on acquisitions and integrating them well. They relied on the Paw Patrol franchise a lot, but that is relying too much on a single franchise. This is a hit-or-miss situation which he doesn't like. TOY doesn't have the track record of Disney to withstand that risk.
0
PAST TOP PICK
(A Top Pick Jun 01/21, Up 12%) Owned this since 2014 and his largest position. Founder-run and the best capital allocators on the planet. Generate returns of 30% since 2006. He expects this to continue. CSU doesn't rely on debt, so they can buy companies cheaply in this economic downturn.
computer software / processing
PAST TOP PICK
(A Top Pick Jun 01/21, Down 19%) Been challenging, though has added at lower levels recently. They had huge challenges in Covid, namely selling infant formula to China which was shut down of course. A2M recently launched in Canada, so he's optimistic they will return to pre-Covid profits. But this turnaround is taking time. Likes the brand, but is getting a little impatient.
agriculture
PAST TOP PICK
(A Top Pick Jun 01/21, Down 2%) Owner holds 17% of stock. No debt, high returns, asset lite and buying back shares. Checks all the boxes. Still likes it.
Consumer Products
COMMENT
Gold and oil outlook in Canada No idea where either is going. But doesn't see sustained long-term upside or downside. A company can be the best-run oil company, but they don't control the price of what they sell. We are in an economic slowdown, so oil won't fare well. If the Russian war is resolved, oil prices will fall. To own only oil and gold is risky.
Unknown
DON'T BUY
Is watching it. Problem is that he doesn't like retail, which is an expensive business. But ATZ has some of the highest revenues per square footage and have been successful for a long time. Is confident in the new CEO. If share price fell to $15-19, then maybe. A quality company, but still doesn't make the cut for him.
specialty stores
DON'T BUY
Owns Meta and MSFT instead among FAANG. Meta trades at 12x, so he recently added more. Meta is a hated company, but look long-term. MSFT is a very strong business. Apple has some hit or miss risk when they bring new products to market. Certainly is a cash cow. A strong company. Tough to grow a company this massive.
electrical / electronic
BUY
Owns Meta and MSFT instead among FAANG. Meta trades at 12x, so he recently added more. Meta is a hated company, but look long-term.
0
DON'T BUY
Like Canadian banks, the telcos are a cartel. There should be more telcos for competition which would benefit Canadians. Telcos won't grow much more than overall GDP. The price of data is slowly coming down. They have excess cash flow which they mostly pay in dividends. Growth is 5-10% like a bond. Neither wonderful nor terrible investments. Not for him.
telephone utilities
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