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(A Top Pick July 29/13. Up 11.67%.) This should have done a whole lot better, but has been mired by regulatory concerns. Feels the US government will be labelling this as “too big to fail”, so capital, leverage and liquidity will be constrained. He would be using this fear as a way to be buying this. Still a Buy.
The UNS transaction is proceeding well and will be modestly accretive to them. This is only a $7 billion company and they have about $8 billion of utility type investments coming online over the next few years. There is a lot of growth here. Also, have potential for a lot of LNG related investments, with their strategic presence in BC.
Great Short? If you Short here, you are going to have to pay that -10% dividend that the stock is paying. They just came out in Q2 and said that the dividend is safe, at least until the end of 2014. The housing data in the US was a big surprise. OSB pricing is exceptionally weak, however the company is executing. Better pricing and their shipments are up 10%, year-over-year. There is a lot of talk right now that the housing recovery doesn’t happen, and he thinks that pent-up demand will eventually turn housing around.
Large Canadian banks for protection and growth? The banks are not cheap anymore, they are back to where they were in their heyday before the credit crunch. However, he thinks the capital is going to continue to go into them, and people are going to be surprised at how much higher they can go. Loan growth in Canada is looking pretty good. Although valuations are 12X, they are still a whole lot cheaper than many parts of the market. The best ones to own are the ones that have the highest tier 1 capital ratios, because they have the ability to make the most accretive acquisitions. That would be Bank of Nova Scotia (BNS-T), Royal Bank (RY-T) and the Toronto Dominion (TD-T). Also, the CIBC (CM-T) if they decide not to issue equity.
Suffered a little bit because natural gas prices have come down. He is constructive on this name. Just reported and had 110,000 production versus 107,000 that the market was looking for. Their Parkland and Tower assets are having very impressive production growth. His model suggests that this could have 40% earnings growth over the next few years. Payout ratio of 116% on 2015 estimates is pretty good. A pretty clean balance sheet.
Have done a great job in replacing their lost Suncor contract. Thinks the 5.1% dividend yield is pretty safe for 2014 with a 71% payout ratio. Have a really good history of growing by acquisition. Balance sheet still has flexibility to be able to make more acquisitions. Not a whole lot of organic growth right now and yet it is trading beyond its 5-year average. He would buy this on a pullback.
They are upping their exposure into the US, which is currently at about 24%. Their goal is 30%. A higher leveraged name, but their balance sheet is improving. He sees in-line growth of around 3.5%, which is equal to its diversified peers. Payout ratio is trending down and looking a lot better.
Have been improving their operations and have been making asset sales, which is what the market wants to see. Payout ratio is getting a little bit better. For the risks, he thinks there are better names such as Long Run Energy (LRE-T) which probably has much better upside. He is optimistic as they have executed on their turnaround, but there are better opportunities elsewhere.
The exciting thing here is that they recently had organizational changes. Split their aerospace into 3 different units. Thinks the signal here is that they may be going to try to spin one of them out and try to generate shareholder value. This has really weak free cash flow, and he doesn’t see the business jet market turning around any time soon.
Had a monster quarter which he thinks was a result of better same-store sales and the spectre of higher inflation in the 2nd half. Company is saying they have $300 million in synergies from Shoppers over the next 3 years. Have an SAP rollout that is intact. He forecasts really good operational earnings growth of about 19% over the next few years, 12% cash flow growth and pretty decent dividend growth of around 7.4%. It is vulnerable that you are not going to get as much inflation in food as the market is positioned for. He would buy this at a lower price.
(A Top Pick July 29/13. Down 4.47%.) Had thought this would be a dividend stock by now, but they weren’t allowed to return capital and have been criticized as too big to manage. Q2 was better-than-expected. Credit quality is improving. Still trading well below its tangible estimated Book Value. Tier 1 capital is really high. Still levered to an improving planet and US. Patience should get rewarded on this.