An over-looked aerospace play currently trying to break to all-time highs above price peaks spanning 15 years. CAE provides modeling, simulation and training for civil aviation and defense.

Very, very good management team. Some really good products. Has a lot of cash. Very high ROE. He owns it, but doesn’t have a massive position in it because it is quite a small company. A good, long-term growth story. Symptomatic of the issues of a lot of the great growth companies, i.e., they were trading in the single digit PE ratios but are now trading in the high teens or mid-20s. Not cheap, but a great one.

Stock had a pull back, but he is not sure why. Looks like a timely opportunity to get in at around $15. Company is growing nicely. Has a good dividend.

PE of 15-16, which is a good valuation. Don’t think you can get this more inexpensively than the current $55. The other thing he likes is the consistency of its performance. Every year its ROE is consistently 23%-24%. Good long-term buy and hold.

Over the last 12 months, this has had one of the weirdest trading patterns on the TSX. It sort of trades between $7 and $9 with no apparent reason. Its lead drug down in the US is doing great. Recent numbers were spectacular. He is meeting with management in a couple of days and wants to question what is happening with the rest of the company and what are they doing to develop the rest of the business. Wants to know what they have to do to get their lead drug moving in other countries, and with the phenomenal cash flows coming in, what are they doing to get other drugs going, etc. If you can buy this under $7.50, it is a very good buy.

His only concern with this is valuation. ROE is quite high, but the stock is now trading in the 22-23 times earnings range, which is getting pricey. Reporting this week and he expects a good quarter. When stocks get trading up in the $20s X earnings, he likes to try to find that same level of growth at a more reasonable price. Has been trimming of late because of valuation.

Think of a bull market as like a baseball game. When you get into the last 3 innings of the game, it doesn’t matter what financials do in earnings, people kind of get cautious. With his recent discussions with management and his own analysis, it suggests all is well. Everything is going well so he continues to own the stock. Has no problems recommending it as a Buy. March year end so people will soon be looking at as valuation in terms of the following year. Right now it is on 20X this year’s earnings and 12X the following year’s earnings. Just be patient and it should get going again.