Daniel Lloyd

Market. Going into the year, he underestimated the potential for equities to advance. Was too bearish, so too cautious. The US economy continues to surprise him to the upside. Europe appears to be improving. Financials conditions are still at record easy levels. The Chinese appear to be orchestrating a soft landing. It’s sort of a Goldilocks scenario that he hadn’t thought was going to play out. We are in a weird space, where it feels like you are going to need an endogenous event to knock the stocks off their perch.

It seems as though the turnaround story is taking hold. The Canadian grocery space is a tough place to be. Pricing is competitive. They have issues with Amazon (AMZN-Q) digging deeper and deeper into the grocery space. Minimum wages are going up across the board. On a relative basis, this looks as good as any.

This is a real industry and there will be winners and losers, but the cumulative market cap associated of these companies feels that they are beyond bubble territory now. Making incremental gains from this point forward is going to be very difficult.

Thinks Canadian banks in general are going to be dragged higher by macro forces, not least of which is energy. This has a pretty solid energy franchise on the investment banking side. Have well above average return on equities, which would typically afford them higher multiples. ROE is about 18%.

Canadian Banks? He looks favourably on Canadian banks in general, because he likes the backdrop for energy. This is his favourite, and is actually the smallest of the group. Trades at the lowest valuation of the entire group. Trades at 1X Book compared to the National Bank (NA-T) at 2X. The Canadian bank trade should continue to drift higher.

Banks are doing well, but unfortunately it is at the expense of the independent brokers in Canada. This is certainly cheap, but the Canadian broker space in general is challenged, because you have the banks on the investment side of things and are doing smaller and smaller things.

Has a very strong Asian franchise, which is very beneficial, as it is the high growth area of the world. The issue he would have is their earnings sensitivity to the interest rate curve, which continues to flatten.

The tissue space in general is struggling with pricing, probably as a result of over pricing in North America. Having a pure play in this area is not something you would want to do. Expects it will be challenged for the next couple of quarters. Prefers Cascades (CAS-T), which has an offset with container board/cardboard packaging.

Had a big miss last quarter, largely on the back of their tissue exposure, so this is a pretty opportune time to be buying. The free cash flow is in the neighbourhood of 15%. If there was an upswing in the tissue space, this would benefit, but is not something he is holding his breath for.

The predominant player in the Canadian Bakken. Their decline rate is about 30%, which is higher than what he would like to see. Trading at 5X cash flow, so it is very, very cheap. Assets are reasonable, and are probably benefiting from strong oil prices and a weaker Cdn$, yet nobody seems to care. There are better names to own.

Life is as good as it is going to get for metallurgical coal producers, trading at about $200 a ton. Restart of mines is going on around the world and in North America. Looks cheap, but given the cyclicality of the business, it is pricing in maximum earnings.

If interest rates stay low, this company will benefit. They has very, very high-quality assets, both in Canada and Europe. Have carved out a nice position as a large offshore wind producer. Bidding on contracts all around the world at the moment. He likes renewable energy in general, as perpetual cash flow is a very interesting thing. Has a nice yield of 4.5%. A good place to be.

(A Top Pick Sept 15/16. Up 6%. Up 6%.) The 3^rd quarter was not good. Owning down here is going to end up looking very good a year from now.

(A Top Pick Sept 15/16. Down 22%.) *Short* He is still Short. The return represents the worst snapshot possible, but as he has held this for a long time, he is still profitable. Wealth management and mutual fund space in general has been a very tough spot. Feels the stock is still expensive.

(A Top Pick Sept 15/16. Up 28%.) *Long* (Pairs trade with a Short on TRP-T.) He still has both positions on.