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Markets. He is really agnostic as to market conditions, and the last few months have demonstrated that in terms of the ability of his portfolios to react to market conditions. In August his portfolios were flat to within a percent down for most of the month and then, ironically as markets rallied harder in the last 4 days, some of his Short positions really kicked in. He ended up about 2% down in the month. His portfolios are designed to perform very well in Down markets and Sideways markets, and moderately Bullish markets. When you get very strong increase in market conditions, like there was in the last 4 days of August, ironically the fund doesn’t do as well. However, at that point most investors have other stocks in their portfolio that are doing well. The bulk of his investments in his Flagship Fund are in Pair Trades. People are often confused about Pairs as to how you can make money being Long and Short in stocks in the same sector. The idea is to try and remove industry specific risks. E.G. if Long Canadian National (CNR-T) and Short Canadian Pacific (CP-T), he is taking out weather risk, regulatory risks and input fuel type risks. It also takes out a lot of market risk. This is isolating the specific factors that differentiate these 2 companies.

You need to look at this in 2 different ways. Operationally this has been a very well-managed group over the last 20 years. In the downturn in 2008, they did very well operationally in spite of the share price. However, you have to separate the sentiment on the stock. This is viewed as a pure play on Cdn housing. American hedge funds have been very bearish on Canadian housing, and this is the largest and most liquid way to play it aside from the banks. You’re really going to be finding some headwinds over the next few months, if not quarters. He would be cautious, but if you hold the stock you’ll be fine over the long-term.

Has a technology that helps oil/gas companies locate reservoirs, at about a 30^th of the cost of traditional seismic. In April they announced a US $15 million contract with Bolivia National Oil Company. Have been paid about 40% down payment, and in October they should complete the analysis portion and then they will be fully paid. For an investor, they use a very conservative accounting technique, so they don’t recognize any of the revenues from this project until everything is absolutely done. It won’t be until 4^th quarter that we see the full revenues. On a “back of the envelope” calculation, they have 85% margins. If you strip that out, on this one contract alone they are trading 10X this year’s earnings. He is very happy with this holding.

For the 1^st time since 2008, their water heater net sales are greater than their attrition. New legislation in April put a lot of curbs on door-to-door sales, and this is benefiting them. July is normally the peak season for door-to-door sales, so this bodes very well for them for the 2^nd half of this year. In the sub-metering business in the last quarter, they had positive cash flow and positive EBITDA for the 1^st time, and the street hasn’t given them any credit. Dividend yield of about 6%. Very undervalued and should trade at a premium in the utility sector instead of a discount. He really likes the name.

Has a lot of concerns about this company. This is a rollup strategy in car dealerships primarily in Western Canada. The price of oil and the economy, to Alberta in particular, has now been translated directly to auto sales within Alberta. There are a lot of headwinds. He is looking at this as a possible Short again.

Railway ties and telephone poles. Came out with some pretty decent numbers this summer. This is a low key, low risk type of company that has been a decent performer. He wouldn’t hesitate to Buy this.

(A Top Pick Oct 21/14. Long. A pairs trade with Laurentian Bank (LB-T). Down 38.22%.) This is essentially a lender to distressed companies. That seems to be the thesis on the main Shorts on this name. Trading at about 8X next year’s earnings, which is attractive. Announced a dividend, partly to offset some of the Shorts, and has about a 5.5% yield right now. At these levels, he is willing to sit on this.

(A Top Pick Oct 21/14.) (A Short. Down 15.36%.) Thinks this is a classical, over-owned Canadian name. It is a name that institutional managers love to own, so as a consequence it trades at 40X last year’s earnings, at about 29X this year’s. Putting it in perspective, you can go south of the border and get a name that is larger, more liquid, and trading at about two thirds of the valuation.

(A Top Pick Oct 21/14. Up 64.3%.) There has been some anticipation of the bank license coming through this summer, but this is outside of their control. Had some headwinds in the last 2 quarters on an operational level, largely due to the strength of the US$ against the euro, their main trading currency. Thinks there will be growth ahead once they get the bank license through.

(A Top Pick Oct 21/14. Short. A pairs trade with Callidus Capital (CBL-T). Down 1.84%.) He has a long-term Short on this bank.

Early in the Obama administration, the US put in a lot of patent controls into their crosshairs, as it was stifling a lot of innovation in the US economy. Because of this, there have been headwinds against stocks like this. The whole sector has suffered over the last 5 years. Trading at about 4X trailing earnings, 4.5X this year’s and 7X next year. It is super cheap with a yield close to 8%. Attractive at these levels, but it is a black box. There is no insight as to what the patents are and how the patent litigation is going to materialize.

Hasn’t looked at this in a very long time. A name that has been long on promise and short on delivery. He gave up on this many years ago.

Has been crushed in the last 2-3 years. It’s a way to play the infrastructure boom in Western Canada, and is more of a play on BC LNG. He is very cautious about the prospects for LNG in BC in the current environment.

Likes the management team; it’s just the business model that he doesn’t really like. Generally they have a portfolio of about 12 investments, and if he is going to invest in something along that basis, he would make those investments himself. Unless there is something particular in those portfolios that he can’t replicate himself, he would rather do it directly. Dividend yield of 5.7%.

To some extent, he thinks the market has been unduly harsh, but it is really viewed as one of the best pure proxies on the economy in Western Canada. As a consequence there have been a lot of Shorts on the name. Believes it is one of the worst performing Canadian banks over the last 12 months, and doesn’t see that changing in the near future.