Stock Opinions by Brian Madden - Stockchase Experts
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Brian Madden @

On Stockchase since : Aug 2016

Senior VP & Portfolio Manager

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Stock Opinions by Brian Madden - Stockchase Experts


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COMMENT
General Market Comment 

September 13, 2018

"Late cycle" is a time when investors transition from pro-cyclical stocks (energy, consumer discretionary) into telcop, staples, utilities and healthcare--defensive stocks. That said, Canadian telcos haven't done well, though utilities and real estate have done better. Investors need to review their asset allocation (stocks/bonds mix) to protect themselves in this late cycle when multiples contract from 16x to 14x earnings in the S&P. Tighter money will mean less company hiring and consumer spending. Resolving NAFTA (finally) will be a big relief--and it will happen. It will be positive for Canada. Foreign investors will look at Canada more favourably. The auto sector may enjoy a pop.

"Late cycle" is a time when investors transition from pro-cyclical stocks (energy, consumer discretionary) into telcop, staples, utilities and healthcare--defensive stocks. That said, Canadian telcos haven't done well, though utilities and real estate have done better. Investors need to review their asset allocation (stocks/bonds mix) to protect themselves in this late cycle when multiples contract from 16x to 14x earnings in the S&P. Tighter money will mean less company hiring and consumer spending. Resolving NAFTA (finally) will be a big relief--and it will happen. It will be positive for Canada. Foreign investors will look at Canada more favourably. The auto sector may enjoy a pop.

Unknown
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$0.020
Owned Owned
Unknown

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WEAK BUY
First Capital Realty(FCR-T) 

September 13, 2018

A large owner-operator of shopping malls. 4.2% dividend. It's been sideways. It's an income vehicle and a slow grower. You own this for stable income. He doesn't see a retail "apocalypse." Safe dividend, maybe an increase, and a good
operator. This won't scream up in price anytime soon. It's stable. Prefers Riocan REIT.

property mngmnt/investment

A large owner-operator of shopping malls. 4.2% dividend. It's been sideways. It's an income vehicle and a slow grower. You own this for stable income. He doesn't see a retail "apocalypse." Safe dividend, maybe an increase, and a good
operator. This won't scream up in price anytime soon. It's stable. Prefers Riocan REIT.

property mngmnt/investment
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$20.440
Owned Owned
Unknown

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DON'T BUY

Franchisees are battling the owner, and he sides with the franchisees. Management is squeezing the life out of franchisees. Same-store sales growth has tailed off. Innovating with all-day breakfasts hasn't taken off. International expansion make sense, but how successful will they be in China? He's on the sidelines.

food services

Franchisees are battling the owner, and he sides with the franchisees. Management is squeezing the life out of franchisees. Same-store sales growth has tailed off. Innovating with all-day breakfasts hasn't taken off. International expansion make sense, but how successful will they be in China? He's on the sidelines.

food services
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$58.590
Owned Owned
No

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DON'T BUY
BCE Inc.(BCE-T) 

September 13, 2018

He doesn't like telcos and BCE is his last choice in this sector because they have the greatest expsoure to the legacy telecom business. Wireline telephone service is declining, especially among Millennials. If you want income, look at the banks.

telephone utilities

He doesn't like telcos and BCE is his last choice in this sector because they have the greatest expsoure to the legacy telecom business. Wireline telephone service is declining, especially among Millennials. If you want income, look at the banks.

telephone utilities
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$52.050
Owned Owned
No

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DON'T BUY
Dollarama Inc.(DOL-T) 

September 13, 2018

Down 17% today, their single-worst day. It's been a Canadian retail success story, but earnings were slightly disappointing today. Traditionally, it's had super, robust earnings growth with 5% increases in same-store sales. After a decline in Q1 2018, investors expected better results from Q2, released today, and didn't see it, so they sold it off. He'll take a closer look at this again--but not right now. Give it time to for the dust to settle, then maybe take a position.

Consumer Products

Down 17% today, their single-worst day. It's been a Canadian retail success story, but earnings were slightly disappointing today. Traditionally, it's had super, robust earnings growth with 5% increases in same-store sales. After a decline in Q1 2018, investors expected better results from Q2, released today, and didn't see it, so they sold it off. He'll take a closer look at this again--but not right now. Give it time to for the dust to settle, then maybe take a position.

Consumer Products
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$43.120
Owned Owned
No

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WEAK BUY
iShares S&P/TSX 60 ETF(XIU-T) 

September 13, 2018

He's a stock-picker and prefers selecting stocks within the 60 Canadian stocks in this ETF. But this is a sensible, middle-of-the-road approach to investing in Canada. You won't lose over time.

investment companies/funds

He's a stock-picker and prefers selecting stocks within the 60 Canadian stocks in this ETF. But this is a sensible, middle-of-the-road approach to investing in Canada. You won't lose over time.

investment companies/funds
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$23.810
Owned Owned
No

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PAST TOP PICK
Royal Bank(RY-T) 

September 13, 2018

(Past Top Pick, Nov. 30, 2017, Up 5%) The TSX is up only 1% YTD, which shines a light on the importance of income stocks. He still likes RY. They put up good numbers recently, like growing earnings by 13%. Their wealth management sector is on fire. U.S. operations are doing well. They're investing into tech--in digital platforms--and taking a long-term view. This is good.

banks

(Past Top Pick, Nov. 30, 2017, Up 5%) The TSX is up only 1% YTD, which shines a light on the importance of income stocks. He still likes RY. They put up good numbers recently, like growing earnings by 13%. Their wealth management sector is on fire. U.S. operations are doing well. They're investing into tech--in digital platforms--and taking a long-term view. This is good.

banks
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$103.000
Owned Owned
Yes

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DON'T BUY
Canopy Growth Corp.(WEED-T) 

September 13, 2018

He's avoided the weed space, because cannabis producers--being commodity producers--have very low profit margins. This is a gold rush now. Some companies will survive, but some won't. There are legalization challenges, especially about edibles. Canopy will survive, because Constellatioon Brands is its major backer, but doubts it can maintain its stock levels. Right now, cannabis is a total crap shoot, though Canopy is one of the strongest of the pack.

agriculture

He's avoided the weed space, because cannabis producers--being commodity producers--have very low profit margins. This is a gold rush now. Some companies will survive, but some won't. There are legalization challenges, especially about edibles. Canopy will survive, because Constellatioon Brands is its major backer, but doubts it can maintain its stock levels. Right now, cannabis is a total crap shoot, though Canopy is one of the strongest of the pack.

agriculture
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$57.280
Owned Owned
No

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DON'T BUY
CI Financial Corp(CIX-T) 

September 13, 2018

It's really struggled this year. A problem for all asset managers is an ongoing price war led by the banks. As a result, CI has had to cut fees, but also halved their dividend (last month). Also, their key funds are underperforming. The organic growth is gone. This is a value trap. Avoid.

investment companies/funds

It's really struggled this year. A problem for all asset managers is an ongoing price war led by the banks. As a result, CI has had to cut fees, but also halved their dividend (last month). Also, their key funds are underperforming. The organic growth is gone. This is a value trap. Avoid.

investment companies/funds
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$20.500
Owned Owned
No

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DON'T BUY
Freshii Inc(FRII-T) 

September 13, 2018

It's struggled for a while. He knows it very well. When it was private, it was a great growth story. The valuation at the time of the IPO was ludicrously high with unrealistic growth expecations. He still feels this way.

food services

It's struggled for a while. He knows it very well. When it was private, it was a great growth story. The valuation at the time of the IPO was ludicrously high with unrealistic growth expecations. He still feels this way.

food services
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$4.500
Owned Owned
No

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DON'T BUY
Linamar Corp(LNR-T) 

September 13, 2018

All auto parts stocks have been beat up because of NAFTA treaty delays and Trump's tariffs. Auto parts involve steel and aluminum which also face tariffs. Also, the auto cycle has likely peaked in North America and maybe the world. We could see an extended slide in auto sales.

transportation equip & components

All auto parts stocks have been beat up because of NAFTA treaty delays and Trump's tariffs. Auto parts involve steel and aluminum which also face tariffs. Also, the auto cycle has likely peaked in North America and maybe the world. We could see an extended slide in auto sales.

transportation equip & components
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$61.060
Owned Owned
No

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BUY
Agnico-Eagle Mines(AEM-T) 

September 13, 2018

Gold is an enigma--sometimes is a currency or a hedge against inflation or something else. What's holding back gold now is that it's the inverse of the U.S. dollar--which has been strong this year. Producers like Agnico have operating leverage--when gold prices rise, their prices and earnings will rise disproportionately more than the commodity. Agnico has several mines operating well. It's a good house in a bad neighbourhood.

precious metals

Gold is an enigma--sometimes is a currency or a hedge against inflation or something else. What's holding back gold now is that it's the inverse of the U.S. dollar--which has been strong this year. Producers like Agnico have operating leverage--when gold prices rise, their prices and earnings will rise disproportionately more than the commodity. Agnico has several mines operating well. It's a good house in a bad neighbourhood.

precious metals
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$43.670
Owned Owned
Unknown

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PAST TOP PICK
Inter Pipeline(IPL-T) 

September 13, 2018

(Past Top Pick, Nov. 30, 2017, Down 10%) A steady business, but was sold off as interest rates rose. Also, investors misunderstood their major growth project, which he thinks is sound. IPL is building a plant to process and move rich natural gas out of Alberta which will finish in 2021 and produce good profits. Investors are taking a wait and see approach, though. Pays a 7% dividend yield. He's happy to hold it.

oil pipelines

(Past Top Pick, Nov. 30, 2017, Down 10%) A steady business, but was sold off as interest rates rose. Also, investors misunderstood their major growth project, which he thinks is sound. IPL is building a plant to process and move rich natural gas out of Alberta which will finish in 2021 and produce good profits. Investors are taking a wait and see approach, though. Pays a 7% dividend yield. He's happy to hold it.

oil pipelines
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$23.240
Owned Owned
Yes

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PAST TOP PICK
Nutrien Ltd.(NTR-T) 

September 13, 2018

(Past Top Pick, Nov. 30, 2017, Up 18%) He bought this two years ago at the bottom of the cycle, and now the oversupply glut is clearing and India is paying higher prices for potash. Has $5 billion in cash and will likely make accretive purchases in the future.

agriculture

(Past Top Pick, Nov. 30, 2017, Up 18%) He bought this two years ago at the bottom of the cycle, and now the oversupply glut is clearing and India is paying higher prices for potash. Has $5 billion in cash and will likely make accretive purchases in the future.

agriculture
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$73.360
Owned Owned
Yes

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DON'T BUY
Altagas Ltd(ALA-T) 

September 13, 2018

Announced a spin-off yesterday. He used to own it before they bought WGL. ALA is selling the family jewels to afford it. (He sold to get more pro-cyclical exposure.) He dodged a bullet. This is a debacle of corporate governance. The WGL deal took too long to close, expensive, levered up their balance sheet and got put on credit watch. Now, they're selling non-core assets. He has no confidence in the management and doesn't know if the dividend is safe.

oil/gas

Announced a spin-off yesterday. He used to own it before they bought WGL. ALA is selling the family jewels to afford it. (He sold to get more pro-cyclical exposure.) He dodged a bullet. This is a debacle of corporate governance. The WGL deal took too long to close, expensive, levered up their balance sheet and got put on credit watch. Now, they're selling non-core assets. He has no confidence in the management and doesn't know if the dividend is safe.

oil/gas
Brian Madden

Senior VP , Goodreid Investment ...

Price Price
$23.480
Owned Owned
No

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