Robert Gill

Buying high-quality Canadian companies at attractive valuations has historically done very well in inflationary environments like those we're experiencing now. For much of the past decade, growth stocks have done quite well. But growth stocks are longer-duration assets, so much of their value is based on expectation of future growth. When interest rates increase, valuation tends to drop by applying a discount rate. 

SHOP is an excellent example of this. Down 70% since November 2021. Despite that, the Canadian market has performed relatively well. In 2022, Canada had a strong return for developed markets. YTD, it's up about 5-6%, so it's starting out pretty well.

Looking at a chart of PE multiples for the last 20 years, right now there's a significant difference between the two in terms of multiples. The S&P is trading at 19x earnings, while the TSX is at 13x. That's about a 50% difference, and means that the Canadian market offers much better value right now relative to the US market. Other multiples such as price to book show the same thing. Dividend yield for the TSX is 3.2%, whereas in the US it's a paltry 1.7%.

Warren Buffett likes to say, "Be fearful when others are greedy, and be greedy when others are fearful." Now is the time to be a little bit greedy for Canadian equities.

High quality. Global leader. Geographically well diversified. Largest company in Canada by revenue. Very well managed. Very high ROE (well above market average) and fairly strong balance sheet. Fuel represents about 75% of total revenues. Reasonable multiple of 16x earnings. Buy here, and certainly on a pullback.

Very high quality. Headwinds of safety and production issues. New CEO seems to be a good move. Lots of free cashflow. Increasing impressive dividend, now about 5%. Paying down debt, so balance sheet is strong. Growth strategy in place. Underperformed YTD, but will catch up longer term. Good buy here.

Largest in Canada, #3 in the US, #10 globally. Likes that Saputo family is largest shareholder. Busy making acquisitions. Historically, profitable with good ROEs. Some lesser profitable acquisitions have increased sales, but not net income as much. Synergies will eventually improve the bottom line.

Very strong brand. Airlines are historically difficult businesses: capital intensive, huge fixed costs, unions, commodity pricing, government regulation. It doesn't have impressive profitability, high ROE, or strong balance sheet. He'd be open to buying if the metrics changed.

Impressive profitability. High ROE and ROIC. Strong balance sheet. 

Barometer of profitability of the Canadian market is 12%, US is 14%. That's the average, and he wants companies that are better than average.

International operations. Top 3 supplier globally. Historically inexpensive multiple. Shares volatile recently. Higher interest rates, higher commodity prices, higher input and labour costs, supply chain issues. Remains cautious. 

Inflation waning, supply bottlenecks easing. Very good management. Long-term hold. Nice dividend above market yield.

Largest manufacturer in the world. Quality company. Would own at the right price. Impressive profitability, solid balance sheet, pretty good dividend yield for income. Attractive valuation at 8x earnings, but wait. He likes it below $80.

Global mining. Operations diversified geographically. Coal business is not ESG-friendly. Glencore offered 20% premium. Company split is off the table. High-quality assets, so he expects another bid. Trading high. Lots of speculation. Watch from afar.

Really likes how it tries to move away from competing with online retailers. A lot of items are larger or seasonal. Shares down from all-time high of $215. Still more to go, you could still buy here. Well managed, nice dividend. A reversion to the mean with a dividend story, not a growth story.

See goodreid.com for his March 3 article on this. Coastal GasLink is 87% complete, so risk of further cost overruns or negative news is fairly minimal. 13x earnings, solid balance sheet, attractive PE multiple.

High quality. Tremendous success over the years. Management always tries to create value. Smart operators, very good assets. Long term, it's one to own. 

Operates under a number of different brands. Note that POW owns about 70% of shares. Growth can be slower than peers, but a steady earner with impressive dividend yield of 5.4%. Trades at a single-digit multiple. Buy and hold for the long term. Very well managed.

Asian franchise gives it good growth potential, and that area of the world is growing faster than the others. High quality. Very well managed. Good dividend yield.