- Page 1/3
- Next Page
One of his favourite names. They have a technology that allows oil/gas companies to use their exploration budget more efficiently. It augments 2-D and 3-D seismic, and about a 30th of the cost of 2-D. Allows companies to pinpoint where they should be using their seismic budget. A lot of their customers currently are the national oil companies. Ironically, as a lot of the oil prices dumb down, there is a lot more pressure on them to increase revenues and production. Recently signed a $13 million deal with a Bolivian National oil Company and another with a national oil company in Pakistan. Both have room to expand. This is also a direct play on the denationalization of Mexico, of which phase I has actually started. Because of this, some of the super majors who want exposure in the Gulf of Mexico are going to start using this company’s technology.
They provide software that simulates both the field and production in oil/gas fields. Took a hit along with the energy related names, but it kind of bottomed out around November when people realized it was a very resilient company with about 97% of their revenues recurring. Recently added to his position. A great long-term hold. Dividend yield of just under 3%.
On one side you have the Catalyst Fund, one of the largest private equity funds in Canada. On the other side is another large private equity fund of WestPhase (?). These 2 are fighting over various issues and have used this company is a battleground. In Nov/14, WestPhase put forward a short case in the form of a proposition. Callidus is a lender to distressed lenders, so it is pretty easy it is pretty easy to paint a bearish scenario. Because of this, the share price has traded off fairly dramatically. Still holding and is comfortable with it.
Airlines have benefited from the collapse of crude prices, but he thinks a lot of that is already baked into the stock. This company has some specific problems that have yet to be reflected in the share price. The 1st one is Rouge, a discounted airline which has about a 22% overlap between the 2 on their routes, as well as being significantly cheaper. Also, there is a potential launch of another airline in Western Canada. He is Short this stock.
In terms of valuation, it is about 8.5X EV to EBITDA, a similar multiple that EnerCare (ECI-T) trades at, but it appears inflated to him. Comparing the underlying fundamentals to EnerCare, there should be no comparison. He doesn’t understand what this company’s business is. Their attrition rate is about 16% per year. This means to just stand still they have to find 16% in new customers. That is not a very sustainable model. He is Short this stock.
(A Top Pick June 18/14. Up 53.06%.) Short. Had been looking at their technology and had some skepticism about it. This was virtualization technology that was supposed to be able to take any application and run it on any mobile device. Earnings and losses continue to disappoint. Also, they announced an acquisition last year that he found perplexing. He is still comfortable with this.
(A Top Pick June 18/14. Up 27.47%.) Continues to like this. They are #4 in terms of their market share as a residential mortgage lender in Canada, just behind Home Capital Group (HCG-T). They have about $21 billion on mortgages under their administration. It has a lot of potential, which he feels is not being captured by the street.
This is a stock that all money managers seem to love. To him it is trading at very expensive multiples at around 39X last year’s PE and about 26X this year’s. They are embarking on a new venture called the Rec Room, essentially bars and casual dining within the cinemas. As a consequence, he thinks the stock should be de-rated. Has this in a Pairs Trade with Cinemark (CNK-N), with this one being the Short.
You can think of this as a listed capital ventures fund. They invest in relatively small companies. Instead of owning one small cap company, they can have a stake in 23. They provide financing to companies that can’t get bank financing, and they take a royalty on the sales. Their payback on these investments is 4 years, and the return on the investments is about 25%. The venture capital business in Canada has been a graveyard for the last 25 years. The guys running this are very experienced and are deploying the money effectively. Have about $33 million invested with about $22 million and capacity. Thinks it will grow substantially this year. Dividend yield of about 5.5%. A great investment and it is early innings of a long-term story.
Markets. He tries not to forecast the markets, but is cognizant that we are in the month of May, and selling will have some merit to it. Also, be aware there are opportunities in the summer, which is one of the reasons he has pulled down his net exposure in his portfolios and is sitting on around 67% cash in his flagship fund. Still likes non-bank financials and he tends to use the banks as a hedge for market risk. Likes the consumer stocks as there is a scarcity value of those. As investors flee from the resource space, that tends to be a safe haven for them. Avoids direct exposure to the resource space. More of a “bottom up” investor rather than a sector player. A typical hedging trade could be Canadian Pacific (CP-T) which is overvalued, and where the first risk is market risk and the second industry specific risk. Because of this, it would not normally be in a pairs trade within that sector, so Canadian National (CNR-T) would be a natural choice. If diesel fuel goes up or down, it affects both of them equally, which helps to take out some of the risk in the portfolio. This allows him to focus on the alpha.