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Stock Opinions by Jason Del Vicario

COMMENT
He prefers asset-light companies. We're seeing inflationary pressures, perhaps long-term or short. Real estate and commodity companies don't perform as well as asset-light during inflationary times. Both kinds of companies can raise prices, but the asset-lights have much lower input costs, so that's the advantage. Example: Google is lighter than Amazon, because the latter has a cloud operation in addition to their retail.
Unknown
WEAK BUY
The CEO has a great track record, but he's been slow to deploy capital which the market doesn't like. He bought a company in Brazil, so there's currency risk. Hold on and be patient. Short-term, investors are frustrated, but long term this should be fine. The CEO is sitting on a lot of cash.
0
HOLD
Excess cash based on asset base is around 17 and has risen in recent years, but should be above 20 and is inconsistent. Hold on, or enter at a lower price. This could be vulnerable as we move into the reopening and the economy's ups and downs. Quebec companies like this tend to outperform.
Transportation
DON'T BUY
No surprise that shares have come off after paying their dividend. This is normal. The recent decline in lumber prices (at record highs) doesn't worry him. However, commodity stocks are at the mercy of those commodity prices, which is why he avoids them. They go up and down and he won't guess where lumber prices and IFP will go in the future, but he wouldn't be surprised if there was more downside.
west coast forestry
DON'T BUY
It's being acquired now, so there's little juice to squeeze here. The market is assuming the deal will happen. He owns Evolution Gaming (Swedish) instead, which operates the software for online gaming (EVO is the ticker).
entertainment services
COMMENT
Uranium as an investment He used to own uranium until Fukushima happened, and the industry has tanked since then. He's of two minds about uranium: it's clean and readily available, but there is a lot of risk (i.e. Fukushima, Chernobyl disasters). He prefers quality, STABLE companies. Uranium companies are all over the map, unpredictable. So, he doesn't invest in uranium.
Unknown
HOLD
Still owns a sizeable position. They have turned the company around and he's been in touch with them. It's a traditional printing business that's transitioning into a marketing business model. Shares are cheap now, and shares can easily be $2-3 higher. The market is in a wait-and-see mode to see if they can reduce costs and raise profits. Quality managers who own a lot of shares, which is a plus. He continues to hold it. When the stock reaches fair value, he'll sell at least partially, because it isn't stable and predictability, which is a quality he now demands in a stock.
0
PAST TOP PICK
(A Top Pick Jul 06/20, Down 15%) This was a hedge against the market falling during Covid last year. TLT is the best hedge to the Canadian long stock investor. TLT holds long-dated US treasuries (in USD). When things go pear-shaped in late 2018 or March 2020, TLT does very well, because there's a rush to market safety. Also, TLT will reduce market volatility. He still holds this, but sold part of it. The consensus now is that there will be sustained inflation moving forward. TLT should continue to do well. He expects this to fall round $120 and would add to his holdings here. The bond bull market is not over, he feels, though many do.
E.T.F.'s
PAST TOP PICK

(A Top Pick Jul 06/20, Up 4%) It's an asset-heavy business which won't fare as well in inflationary times that we are entering. He prefers asset-lite companies and in this space prefers royalty plays like Franco-Nevada. But KL is the best-run gold company out there, with fine managers. His position is smaller now. KL does hold a 7-8% free cash flow yield vs. 2-3% among its peers.

precious metals
PAST TOP PICK
(A Top Pick Jul 06/20, Up 13%) The best capital-allocating managers in the world anywhere. A Canadian gem. Still holds and likes it.
computer software / processing
DON'T BUY
With line 5 shut down, how safe is the dividend? He prefers the pipelines over the oil producers, because they're one step removed from commodity price fluctuations. They are much better dividend payers out there, though his focus isn't dividends (he prefers companies that reinvest well). He can't speak to the line 5 shut-down, but look at ENB's payout ratio. If that's over 75%, be worried. Also, he sees wildly fluctuating metrics which he doesn't like; he prefers stable metrics.
oil / gas pipelines
DON'T BUY
An American study ranked the at the top of their research list. Fundamendentals: they've never had positive free cash flow, which is a red flag, and they're diluting shares with an issuance. Doesn't know how their business model will perform long term, especially without government support. Now, our governments support green energy, but what happens if this vanishes overnight? Can their product sustain itself without subsidies? If you own this, own only 1-2% of your entire portfolio.
0
COMMENT
The best three Canadian banks The banks are stable and predictable. They pay moderate returns, albeit a little below what he prefers. His top 3: RY, TD and BNS though National Bank is close. The banks are at the mercy of interest rates, and he expects rates to go down, and this will pressure bank stocks. For the banks, have a 5-10-year horizon.
Unknown
DON'T BUY

The Saudis selling Canadian oil and buying ATVI He doesn't read too much in the Saudis diversifying into videogames. ATVI has a stable, long history of free cash flow returns on tangible assets (generally over 20%), so he likes that. Their capex-sales is low so they're asset-light, also good. But they falter in incremental return on incremental equity, which is how much free cash flow they generate on invested capital of 1, 3 or 5 years. ATVI's return fluctuates. Why? He suspects videogame companies have hit-and-miss game releases. (EA falls into the same category.) He avoids such stocks given this hit or miss risk.

computer software / processing
DON'T BUY
A cyclical company. Their metrics show fluctuating returns on invested capital; free cash flow (which he values highly) has been negative at times. Because of the latter, he doesn't own this. Also, we're late cycle in car demand, which directly effect LNR's business.
transportation equip & components
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