Today, Jon Vialoux and Greg Newman commented about whether AGU-T, PEY-T, MG-T, L-T, BBD.B-T, LTS-T, MFC-T, AX.UN-T, PKI-T, ARX-T, TD-T, OSB-N, FTS-T, ATP-T, TRP-T, MET-N, C-N, HSE-T, LRE-T, AGF.B-T, REI.UN-T, SGY-T, EIF-T, GDX-N, WOOD-Q, TD-T, NKO-T, NA-T, BIDU-Q, TOU-T, BNP-T, HEP-T, SCHL-Q, K-N, HFR-T, CKE-T, CNQ-T, PWF-T, WPM-T, DGC-T are stocks to buy or sell.
Natural gas. Seasonality is from September all the way through to November. Last year there was a huge run-up all the way from September all the way through to February. We are within the seasonally weak period, but we are seeing signs of a bottom. Currently there is a bit of consolidation. It has certainly become very oversold.
*Short*. This is the period of seasonal weakness for housing stocks. This tends to impact the demand for lumber. September is particularly weak for the price of lumber. Has declined 80% of the time for the past 20 years for an average decline of 9%. If you do Short this, it’s a good idea to have a Stop at about $53.50.
When the gold miners report their earnings at the end of July that is the kick off to the start of the period of seasonal strength for the miners. This is experiencing a dip today, so you could take advantage of some of the weakness. The average gain between the end of July and September 25 is about 8%.
Markets. Feels the market today was hit by the real, genuine, credible fear amongst the Bears that the Fed could be behind the curve. Yesterday there was a 4% GDP print and today there was some wage inflation, the biggest in a lot of years. We saw the 10Yrs race up, and then drop because of all the geopolitical concerns. That is the kind of thing that can bring an air pocket to this market. Feels we are going to have more of a correction. The S&P 500 cut through the 20, 50 and the 100 on the 2-year daily chart. If right, he can see another 4% down on this move, unless there is some other move that comes out. At the end of the day, this will be a real buying opportunity for a whole bunch of different reasons, but there might be a bit of a challenge for this bull market hegemony that we have seen so long. If rates rise for the right reason, this will be fine. He doesn’t think we are going to 4%-5% interest rates. We might have 2.9%, 3% or 3.2%. In low interest rates, what asset class do people want to go into? Feels that markets are very well supported. In any sort of trending market you are going to have days like today.
Protection strategies in the event of a substantial market downturn such as 20%? For most people it is about asset allocation. If you have a 50/50 asset mix, equities to fixed income with a tactical swing of perhaps 20% either way, then before the 20% happens, you may want to have only 30% in equities. You also want to own stocks that are doing well. Some will benefit from having an option facility. Others can benefit from being able to Short. Also, Futures makes sense. However, the key here is really experience. He finds that people usually put on protection when it is too late.
He likes this name. Its 2013 payout ratio is very high, but on his 2014 assumed numbers, from them turning around their West Tower asset. If they can achieve 4.5% margins in 2014 on that asset and 7% in 2015, he models a 55% 2015 payout ratio. If that’s the case, the 9.7% dividend is fine. He also sees it trading at a very fair value of 8.7X 2015 right now.
Just reported, and earnings were up with EPS at $0.20 versus his $0.08 estimate. They closed on Longview in June and reiterated their guidance. The dividend is fine and the payout ratio looks to be below 100%. As long as you are comfortable owning an oil name with oil falling, this is a good one. His instinct would be to try to buy it on a pullback.
Hedging and protection strategies? Unless he is really, really confident that a position is going to drop, he won’t ever Buy Puts. The reason why options are so good is because you can write premiums. If you like Bank of Nova Scotia (BNS-T), but you think it has $3 downside from here, you sell Calls and you get a second income. If you like Canadian Natural Resources (CNQ-T), but you don’t want to buy it here because you think it is a little too toppy, you oblige yourself to own it a couple of dollars lower by selling the Puts. So options really make sense that way. If you want protection, then Shorting is the much cleaner, better way almost all the time.
Reported today and their same property operating income was up by 1.4%. This has a $1.1 billion development pipeline that can drive growth for years. Their payout ratios are trending down which is a good thing. Very strong balance sheet. The quality is reflected in the valuation of 18X. If you want a retail REIT that maybe has more sizzle and upside, look at Calloway (CWT.UN-T). It has a higher dividend, lower payout ratio and trades at about 14.5X.
Last quarter it fell. There are concerns about its free cash flow. Paid out $22 million in dividends last quarter, and only earned $14.5 million. However, they do have $233 million in cash, so they can achieve that burn rate for 6-7 years if their business doesn’t turn around. Part of the reason for the big burn last quarter was a bit of a mismatch of capital, timing of the dividend and launch of new growth initiatives. Feels they have a pretty good shot of turning their business around, and asset management continues to be a good place to be. Pretty cheap but more for the risk tolerant.
Thinks this is a real good one. Has a payout ratio of under 100%, a dividend of around 7.5%, and is trading at about 3.7X EV discounted to its cash flow, versus its peers of almost double that. Just bought some new properties that fit in well, which should help in terms of execution. A high-risk name, but a very good one to own.
Canadian banks have done phenomenally well. From a seasonal perspective, financials tend to do well into the first half of the year. Canadian financials can track the market higher from October through to December, but this is not as significant as the one in March and April. We are technically in the off-season right now.